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Outbreak undermines consumer spending, chamber CEO says

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Coping with COVID:

SC Biz News is speaking with small businesses and community leaders about the impact of the new coronavirus on business and industry, and how this is changing how they operate.
Contact Andy Owens, aowens@scbiznews.com, with any questions or ideas.


The head of a small business organization in South Carolina said the federal government should put money into consumers’ hands immediately to help keep small businesses afloat during and after the COVID-19 outbreak.

Frank Knapp, president and CEO of the S.C. Small Business Chamber of Commerce, said 70% of the national economy is driven by consumer spending, and public officials and health experts have just told most of those consumers to stay at home.

“Small businesses everywhere are being hammered by this thing,” Knapp said. “Small businesses are driven by consumer demand and, rightfully so, people are being told to stay home.”

Knapp said that Congress is working on a number of measures, but he’s not sure the math works on one of the plans making its way through the lawmaking process.

He said companies of fewer than 500 employees could be required to offer paid leave of up to two weeks if an illness results from COVID-19. To offset that, businesses would have to pay 100% of the employee’s salary and then might be allowed to deduct that full amount in payroll taxes.

Knapp said that works fine for a larger corporation, but a small business with just a few employees might not be able to stay afloat long enough to earn enough to pay sick employees along with employees running the business.

He said there’s also another concern.

“You’ve got to pay the employee, then you have to apply to get reimbursed from the federal government for the money you would pay in payroll taxes,” Knapp said. “The problem is timing; how many months later do they get that money back?”

Knapp said many businesses could be insolvent before they see that money, especially businesses that run on thin margins and use cash flow from current jobs to support their next contracts.

“What if they don’t have the resources to even pay the sick person?” Knapp said. “You might be able to get by if the demand is the same, but if it’s down to 15%, what are you going to do about the ones who are remaining?”

Knapp said the answer could lie in boosting consumer spending, by putting stimulus into the hands of individual buyers immediately. He said increasing unemployment benefits at the state level will help.

That’s not a radical idea, either. Several national lawmakers, Republican and Democratic, have also suggested that an immediate payment of $1,000 per family and $500 per child could help give the economy some stability.

“The federal government has to start putting stimulus money on the street,” Knapp said. “We have to stimulate this economy to get us back to where we need to be, and that means literally writing checks and putting them in the hands of working people.”

Knapp said the issue for small businesses and the larger economy is about getting back to consumer demand.

“Big corporations will survive,” he said. “Small business are totally dependent on that consumer demand for their businesses.”

Reach Andy Owens at 843-849-3142.

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