%1

Small-business owners are bristling over a congressional proposal that would redirect unspent money from COVID-19 programs to provide $10 billion for the federal government’s pandemic health response, including vaccines and therapeutics, the Wall Street Journal reported. At issue is about $5 billion that Congress allocated for three small-business aid programs but which hasn’t yet been spent. Some lawmakers want to repurpose those existing funds for healthcare, rather than allocate new money, because they are increasingly focused on reining in the federal deficit and spending amid a surge in inflation, which is at a 40-year high. Small businesses are facing many challenges, including navigating supply-chain bottlenecks and rising prices. The overall economic recovery from the pandemic-induced downturn is showing continued signs of momentum, but optimism among small businesses deteriorated during March amid concerns about inflation, according to survey data from the National Federation of Independent Business. Congress is set to continue debating the COVID-19 funding measure when it returns from recess later this month. The White House, in March, requested Congress supply $22.5 billion for pandemic-related health needs. Republicans balked at appropriating any new spending. Instead, Senate lawmakers earlier this month negotiated a bipartisan deal that relies on repurposing unused funds to provide $10 billion.

Small-business owners often rely on leasing for the equipment they need, from trucks to restaurant ovens. It’s a way to get set up without having to pour in a lot of cash. The pandemic upended many of those small businesses’ plans. In the process, it has fueled bitter clashes between owners and leasing companies, the Wall Street Journal reported. The culprit is a provision in most lease and finance contracts that binds owners to make years of monthly payments, no matter what happens to their business and even if the equipment doesn’t work or is returned. The industry calls it the “hell or high water clause.” Equipment and vehicle leases totaled about $160 billion in outstanding balances in 2019, the newest available number, according to the U.S. Consumer Financial Protection Bureau. The volume of leases and finance transactions under $250,000 increased by nearly 15% in 2021 from a year earlier after dipping slightly in 2020, according to the Equipment Leasing and Finance Association, an industry group. Many leasing and finance companies are arms of equipment makers such as Deere & Co. and Caterpillar Inc. or of big banks. As of June 2020, about three months after the start of the pandemic, leasing and finance companies had deferred payments on 15% of their equipment-finance portfolio, according to an analysis of data collected by the Equipment Leasing & Finance Foundation. By September they had an average of just 4% of their portfolios in deferral, said the analysis, done by consultant Tom Ware. Comparable figures for bank lending are hard to come by, but many small-business owners say their banks showed more flexibility, as federal bank regulators urged. Bank of America Corp., for one, deferred payments on 20% of small-business credit-card balances and 14% of other small-business loan balances.

Data from the Federal Reserve shows that 85% experienced financial difficulties in 2021. And during that time, more than half of owners who sought loans were looking to meet their operating expenses rather than to expand their businesses, the report found, YahooFinance.com reported. In addition, small business owners are also feeling the sting of higher prices. Inflation in the country is now running at annual 7.9% for the 12-month period ended February, according to recent data from the U.S. Bureau of Labor Statistics. That's the highest since January 1982. In response, the Federal Reserve is raising interest rates — signaling that cost of borrowing money is going up. Even in normal times, small businesses struggled to get loans from traditional banks because "the underwriting models are really designed to take a look at like multiple years of historical financials to risk assess whether they can deploy that capital," said Nick Mathews, CEO of Mainvest, an investment platform that aims to connect small business owners and investors.

U.S. small business confidence fell in March, with the share of owners reporting that inflation was their single most important problem the largest since 1981, a survey showed today, Reuters reported. The National Federation of Independent Business said its Small Business Optimism Index dropped 2.4 points to 93.2 last month, the third straight month of readings below the 48-year average of 98. The index has declined every month this year. Thirty-one percent of owners identified inflation as their single most important problem, up 5 points from February. This was the biggest share since the first quarter of 1981 and replaced worries about "labor quality" as the No. 1 problem confronting small businesses. Annual inflation is rising at the fastest pace in 40 years. The Federal Reserve last month raised its policy interest rate by 25 basis points, the first hike in more than three years. Minutes of the policy meeting published last Wednesday appeared to set the stage for big rate increases down the road. According to the NFIB survey, the share of owners raising average selling prices increased 4 points to a record high of 72% last month. It noted that "price-raising activity over the past 12 months has continued to escalate, reaching levels not seen since the early 1980s when prices were rising at double digit rates." Price increases were across all industries. Half of business owners planned to raise prices, up 4 points from February. Wage inflation could also pick up. Forty-seven percent of owners reported job openings they could not fill, down 1 point from February but far above the 48-year historical average of 23%. The share of businesses reporting raising compensation dipped one point to 49%. About 28% planned to raise compensation in the next three months, up 2 points from February.

Small businesses still have the pandemic and now high inflation to grapple with — and they’re finding it’s tough to get a loan to help with the daily grind, the Associated Press reported. A recently released survey from the Federal Reserve shows how the pandemic has altered the financial landscape for small business. About 85% experienced financial difficulties in 2021, up nearly 20 percentage points from 2019. Back then, more than half of owners who sought a loan were looking to expand; last year, the majority of applicants needed funds just to cover every day operating expenses. Meanwhile, inflation is the highest in decades, with raw materials and finished goods soaring in price and workers demanding higher wages. The Federal Reserve is raising interest rates in response, which means the cost of borrowing money is going up. Even in normal times, it can be tough for small businesses to get loans from traditional banks because they lack the assets and credit histories of bigger companies. During the pandemic, banks have been stingier, outside of COVID-related programs. Two years in, loan applicants are more likely to get turned down or to receive less money than they asked for compared to before COVID-19. Only about 30% of businesses that applied for financing last year got the full amount that they asked for, down from about half in 2019. Firms owned by people of color, firms with fewer employees, and leisure and hospitality firms were least likely to receive the full amount of financing sought. About 68% of applicants got some of the amount they applied for, down from 83% in 2019 and 76% in 2020.

The total 36,049 bankruptcy filings for March represented a 34 percent increase over the 26,993 filings during the previous month of February, according to data provided by Epiq Bankruptcy, the leading provider of U.S. bankruptcy filing data. Similarly, the 34,244 total noncommercial filings for March represented a 34 percent increase from the February 2022 noncommercial filing total of 25,565. The 1,805 total commercial filings in March represented a 26 percent increase from the 1,428 total commercial filings during the previous month. Commercial chapter 11 filings increased 38 percent in March to 292 from the 203 commercial chapter 11 filings in February. Small business filings, captured as subchapter V elections within chapter 11, increased 51 percent to 178 in March from 118 in February.

Congressional negotiators are slated to announce a deal for $10 billion in additional funding for the U.S. Covid response, but were unable to agree on global aid and dropped it from the agreement, the Washington Post reported. The package would enable U.S. officials to purchase more therapeutics, tests, vaccines and other supplies, after the White House repeatedly warned that it needed new funding for those things. But it includes no money for the global response, which Biden officials have said is critical to protect Americans from the emergence of new, potentially dangerous variants in other parts of the world that would likely make their way to the United States. Senate negotiators, including Sens. Mitt Romney (R-Utah), Roy Blunt (R-Mo.) and Richard Burr (R-N.C.), were seeking a compromise with Democrats, after lawmakers could not agree on a $15 billion package that would have included about $10 billion in domestic funding and $5 billion for the international response. The deal set to be announced Monday is expected to repurpose funding from previous stimulus packages, lawmakers said last week.

The House might vote this week on a small-business pandemic aid package that would provide $42 billion for additional restaurant relief and $13 billion for other “hard hit” industries, Roll Call reported. The Rules Committee is scheduled to meet on the revised bill Tuesday afternoon, which indicates floor action soon after. Democratic leaders are whipping the bill to see if there are enough votes to pass it, according to a source familiar with the planning who wasn't authorized to speak publicly. The restaurant and hard-hit business grant funding would be offset by “all funds rescinded, seized, reclaimed, or otherwise returned” from various programs in prior pandemic relief laws. It was not immediately clear if that would score as a full or partial offset for the $55 billion in total funding. Rep. Dean Phillips (D-Minn.) said on Friday that he has been working with Speaker Nancy Pelosi (D-Calif.) for months to provide additional aid to restaurants and other small businesses that were not able to access previous pandemic relief programs. Speaking a few hours before the bill was released, Phillips said that he was hopeful for a vote and that there would be bipartisan support given the measure is offset with recaptured fraudulent awards.