By Gwyneth K. Shaw
Tucked into the $2 trillion Congress recently approved to help American workers and businesses during the coronavirus crisis is roughly $350 billion for small business loans. Yet as Berkeley Law Professor Robert Bartlett dug into the legislation, he quickly realized most, if not all, entrepreneurs would need help navigating this new system.
So Bartlett, a faculty co-director of the Berkeley Center for Law and Business (BCLB) who represented startup companies before becoming a professor, set out to help small businesses understand how they can get assistance amid a cratering economy. Through two videos and a page on the center’s website, Bartlett breaks down the massive CARES Act package and spells out what every small business owner should know.
When he mentioned this work to students in his Corporate Finance class—now happening via Zoom like all Berkeley Law classes—they immediately wanted to get involved. BCLB now has a form to let businesses signal their interest in being matched with a law student to help them navigate the process; nearly 100 companies have already signed up to work with 99 student volunteers and 17 volunteer attorneys.
“Helping companies solve cash flow challenges is at the heart of corporate finance,” Bartlett says. “So it’s a great opportunity for students to learn while helping small businesses weather the storm.”
BCLB is inviting businesses from all over the country, especially those without access to private equity or sophisticated legal counsel, to apply for help. The only restriction is in the time students and volunteers have to offer.
“This economic downturn knows no boundaries,” Bartlett says.
BCLB Executive Director Adam Sterling ’13 says he’s talked with peers at Hawaii, Loyola, Lewis & Clark, Boston University, and Southern Methodist law schools about starting similar initiatives there.
Berkeley Law’s New Business Community Law Clinic, which helps low-income small businesses in the East Bay and Central Valley launch, has also jumped in to help.
The clinic has been fielding questions from the public since March 19, including which businesses are considered essential, how to mitigate the damage from this pandemic, and how to prepare for future outbreaks, says Deputy Attorney Des Lafleur ’12.
The clinic drew nearly 100 participants April 3 for a webinar on how small businesses can survive this crisis, and will host a similar event April 17, according to Director William Kell.
“This presentation will be a living document as program steps continue to roll out and the government continues to add clarity,” Lafleur says. “Before our next workshop, I’ll update it to answer the common questions that I fielded during the Q&A portion of our first event—which was scheduled for our usual 30 minutes but ran two hours.”
The $350 billion Paycheck Protection Plan (PPP) offers low-interest, partially forgivable loans to help small businesses keep employees on their payrolls. Businesses with fewer than 500 employees, sole proprietors, self-employed workers, and contract workers are eligible.
The loans are guaranteed by the U.S. Small Business Administration but actually made by banks. So far the rules released by the SBA, and the application conditions set by the banks, have left some entrepreneurs confused.
Bartlett says an early step should be applying for a PPP loan, since that’s where the bulk of the money is—and it’s unlikely to last very long given the number of businesses on the brink. But there are other things business owners should be doing at the same time.
For example, Bartlett says the CARES Act lets employers wait to pay their share of the payroll tax to the government, which means businesses can use the money they’ve withheld from paychecks to shore up their shuttered operations. There are other tax credits available for keeping workers on staff and for providing paid sick and family leave, too.
In addition, the SBA is taking applications for Economic Injury Disaster Loans that can offer a $10,000 emergency stipend that doesn’t have to be repaid—even if the loan is ultimately denied.
“The $350 billion for PPP is a big appropriation, but it may be a rocky rollout,” Bartlett says. “But these emergency loans come with a cash advance—you could get $10,000 in 72 hours.”
Small business owners need to understand what they qualify for, and understand just how the help is coming.
“It’s basically prioritizing how you get cash the fastest,” Bartlett says. “You wouldn’t want to be a small business owner and put all your eggs in one basket, not realizing that there are these other programs that might get you cash faster.”
Lafleur says the New Business Community Law Clinic is also highlighting the ways in which insurance policies can help businesses stay afloat.
Leading the way
The CARES Act is relatively short on details, Bartlett notes, in part because lawmakers spent so much time negotiating oversight of the $500 billion the Treasury Department is authorized to spend.
“There was intense fighting in Congress over this $500 billion alleged ‘slush fund,’ and as a result they didn’t really think through the details of the $350 billion program that was actually going to small businesses,” he says. “We’ve got five different ways Treasury is going to be held accountable, but not a lot of detail on the small business programs.”
Ping Liu ’20, leading the effort to mobilize students to help through the BCLB portal, says she wanted to find a way to pitch in despite being confined in her apartment.
“This opportunity seems like a great way to alleviate others’ stresses while staying indoors,” she says. “I hope that my contributions towards this project can better prepare small businesses to land back on their feet once the global health crisis passes.”
Berkeley Law Dean Erwin Chemerinsky calls the school’s quick response “terrific” and a great example of rising to meet the pandemic’s challenges.
“I am so impressed and delighted by what our New Business Community Law Clinic, Professor Bartlett, and the Berkeley Center on Law and Business have done to help small businesses receive benefits under the CARES Act, including matching law students with small businesses that need assistance,” Chemerinsky says. “It so embodies the public mission that makes Berkeley Law special.”
BCLB examines the CARES Stimulus Act – Part 1
BCLB examines the CARES Stimulus Act – Part 2