Question

Discuss 2 recent issues faced by small business owners. How are you affected either as an employee, as a customer or as a community member?

Also discuss specific ways how would the $500 billion in relief to private businesses (because of Corona) would be able to create more money back to the US economy?

Answer 1

Answer 1)  

The pain and uncertainty of the impact of the coronavirus on small and medium business owners is staggering and likely to be substantial. Entrepreneurs are being forced to take drastic steps to continue operating and many are fearful about their futures.

As an Employee:

This is the worst time for an employee of an small or medium business. as the business activity has come to a grinding halt the demand has dropped significantly. due to this the employees have been laid off as the businesses cannot sustain themselves. People applying for unemployment benefits have increased 300%. However employees of grocery stores, medical stores and other businesses related to essential services are finding very difficult to cope up. the demand has sky rocketed and they have to work with limited supplies. they also have to take care of themsielves in order to remain safe from the infection.

As a Customer:

Things have changed alot. customers are trying to minimize contact as they cant go out. So online orders have increased many fold. people are also quing up at the grocery stores and medicals shops. As there is alot of uncertainty people are not buying luxury goods and non essential items and hence demand for such products has dipped. As there have been major job losses the demand for goods in general has dropped as people want to save the money for future.

Comminity member:

As social distancing is the norm today we as a community will change permanently. as rations run dry and resources are less we will have to cooperate with each other to survive. We will have to follow strict rules of distancing and we will have to support peopl who have signs of infection. we will have to support the police, doctoes, healthcar workers and govt officials who are doing their duty. Wevwill have to be sensitive to the olde rpopulation and help them whenever necessary.

Answer 2)

The CARES Act appropriates $500 billion in U.S. Department of Treasury loans and loan guarantees for mid-sized and large businesses, states and municipalities.

The Act appropriates $500 billion for “programs or facilities” established by the Federal Reserve for “providing liquidity to the financial system that support lending to eligible businesses, States or municipalities” related to losses as a result of coronavirus, through loans or debt instruments.

As we know the economic activity in the US and all over the world has come to a stand still. the businesses which has been worst affected are the small and medium scale entities. These businesses are normally leveraged, have little cash reserves and operate on a daily basis. The cash cycle functions on a daily basis which has been completely broken due to COVID-19 situation. As the businesses are unable to sustain they are in desperate need of financial help.

let us discuss the relief could be in the offing for them.

The bank loan EMI's could be waived off for a certain period of time. to reduce the burden temporarily.

The infused liquidity could be used by the businesses to restart the economic cycle like buying raw materials.

The firms could use the liquidity to sustain the labor force as they are critical in re-starting the business activity.

The announcement of this bailout could result in a positive sentiment among the business community and the customers.

With the govt backing them other private investors might step in to fund these entities.

This step could encourage customers to go and make the necessary purchases as they have a guarantee for no default.

Banks would be ready to offer support for the businesses community as the business cycle would be re started.