MNI INTERVIEW:US SmallBiz at Risk of Default Wave: Ex-SBA Head

--Congress Should Boost Programs Used in 2008 And After BP Spill

By Ryan Hauser

     WASHINGTON (MNI) - Congress should authorize more emergency small business

lending to prevent a wave of bankruptcies as the coronavirus disrupts supply

chains and hurts retail spending, former Small Business Administration chief

Karen Mills told MNI.

     There is "clearly a high risk of widespread defaults" the former Obama

Cabinet member said Monday. Small businesses have been "under pressure for some

time from trade frictions" and now "face great risk due to the coronavirus."

     "The worse it gets, the more small businesses will face decisions of

shutting down operations and suspending workers," said Mills, a former National

Economic Council member and a current senior fellow at Harvard Business School.

The fallout would create a "severe impact on the economy."

     "We should be deeply concerned" about small businesses that "rely heavily

on a direct consumer base," like Main Street restaurants and dry cleaners, she

said. "As the virus spreads in urban areas," quarantines and slowing business

traffic "will result in decreased revenues that will not be recuperated." 

     One million small suppliers and 4 million small retail companies will be

"greatly affected" by the COVID-19 crisis, she said. Smaller companies will find

it hard to find new suppliers as shipments are interrupted and "operate in

industries that are likely to have a decrease in activity as the economy slows

down." They are also more likely than big companies to face "life threatening

cash flow issues."

     The Small Business Administration should expand its Economic Injury

Disaster Loans to help owners facing a cash disruption, she said, adding she is

already talking to lawmakers about this. 

     "We used these loans effectively following the BP oil spill" to aid small

businesses along the Gulf Coast, Mills said. The emergency loans are "long term

and low interest" and can be applied up to 30 years at less than 4% interest.

     "Direct loans and government aid is the answer because it's very hard to

get the banks to respond quickly enough in these types of disaster or crisis

situations," said Mills. The SBA Administrator can also declare an emergency

allowing the government "to deploy trained disaster response teams to impacted

areas," she said.

     Another form of assistance could be reviving the federal government's

QuickPay program used during the Great Recession, which made payments in 15 days

instead of 30-90 days, Mills said. 

     The proposed federal budget for 2021 looks to cut aid to small businesses,

which she called "a terrible idea in these difficult times." Mills said the

proposal "will undoubtedly hurt, rather than help, small business in the U.S."

--MNI Washington Bureau; +1 202 371 2121; email: ryan.hauser@marketnews.com

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