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Gusto’s Letter to Congress on Behalf of Small Businesses

Gusto Editors  

Gusto exists to serve small businesses across the U.S. We are deeply committed to helping entrepreneurs and their employees thrive. In light of recent events stemming from the spread of the COVID-19 virus, Gusto sent versions of the below letter to Congress, the Small Business Administration (SBA), and financial regulators on behalf of small businesses nationwide. 

We urged Congress to increase and expedite funding for small business loans and grants, provide forbearances on small business loans, and waive interest and fees. We also urged policymakers to open an API for private companies, thereby allowing third parties such as payroll companies to help streamline loan applications, processing, and fund disbursement. 

Gusto will continue to advocate on behalf of small businesses to help get them the vital support they need. Every action, big and small, counts right now. 

-Gusto Editors 

March 19, 2020

To: Senate Committee on Small Business and Entrepreneurship; Senate Banking Committee; House Financial Services Committee; House Committee on Small Business

From: Gusto, on behalf of SMBs nationwide

Re: Urgent SMB Relief During the COVID-19 Pandemic

The Honorable Marco Rubio
Chairman
Senate Committee on Small Business and Entrepreneurship
428A Russell Senate Office Building
Washington, DC 20515

The Honorable Ben Cardin
Ranking Member
Senate Committee on Small Business and Entrepreneurship
428A Russell Senate Office Building
Washington, DC 20515

The Honorable Mike Crapo
Chairman
Senate Committee on Banking, Housing, and Urban Affairs
534 Dirksen Senate Building
Washington, DC 20510

The Honorable Sherrod Brown
Ranking Member
Senate Committee on Banking, Housing, and Urban Affairs
534 Dirksen Senate Building
Washington, DC 20510

The Honorable Susan Collins
413 Dirksen Senate Office Building
Washington, DC 20510

The Honorable Maxine Waters
Chairwoman
House Committee on Financial Services
2129 Rayburn House Office Building
Washington, DC 20510

The Honorable Patrick McHenry
House Committee on Financial Services
Ranking Member
2129 Rayburn House Office Building
Washington, DC 20510

The Honorable Nydia Velázquez
Chairwoman
House Committee on Small Business
2361 Rayburn House Office Building
Washington, DC 20510

The Honorable Steve Chabot
House Committee on Small Business
Ranking Member
2361 Rayburn House Office Building
Washington, DC 20510

Dear Chairman Rubio, Ranking Member Cardin, Chairman Crapo, Ranking Member Brown, Senator Collins, Chairwoman Waters, Ranking Member McHenry, Chairwoman Velázquez, and Ranking Member Chabot:

We applaud your swift action in the last weeks to address the unprecedented COVID-19 pandemic and stabilize the financial system. We particularly appreciate the introduction of the Restoring Economic Security, Confidence and User Endurance (RESCUE) Businesses Act of 2020 to provide $300 billion in small business emergency economic relief,[1] as well as the first and second COVID-19 relief bills that you were instrumental in negotiating in these challenging times. Your invaluable leadership resulted in the passing of legislation that will help small businesses pay their employees, individuals feel secure in taking paid sick leave, and cover expenses as a result of the recent disruptions to their businesses. These unprecedented actions will be critical in rebuilding and reinvigorating small business in the years to come.

We are aware you have put forth various legislative initiatives to help small businesses, and we fully support your efforts. We also applaud your work in negotiating a third legislative package with expanded direct relief for individuals and small businesses. However, we are writing to you today to urge you to take additional specific, immediate legislative action to support small businesses across the country and the families that depend on them. As a platform that represents more than 100,000 small businesses, Gusto believes that the crisis represents an existential threat for businesses across the country and we need your help to ensure the survival of the important small businesses that keep this country running.

Gusto is a people platform that is focused on creating a world where work empowers a better life. Gusto enables SMB owners and managers to easily pay employees and contractors, remit taxes to state and federal authorities, stay compliant with ongoing employment law obligations, and keep accurate records of these activities. Gusto provides payroll, human resources, health insurance benefits, and financial health benefits for more than one million employees of small businesses across the country. We are uniquely positioned to understand the needs and pain points of small businesses, and to provide our – and our customers’ – perspective on how best to serve them during this challenging time. Our SMBs are the lifeblood of this country: 99.9% of the businesses in this country are small businesses and they employ 59 million people.[2]

We have the following suggestions for Congress on how to help SMBs survive this crisis:

1. Mandate that financial institutions provide loans and grants to small businesses that meet minimum safety and soundness criteria as soon as possible, with particular focus on minority and women-owned businesses.

We appreciate that Congress and the Administration have acted rapidly to ensure additional funding for the Small Business Administration (SBA) to provide disaster relief loans as soon as possible. While we are encouraging small businesses to apply for the disaster relief loans administered by the SBA directly, we also think there is opportunity for financial institutions to increase their SBA 7(a) program funding for small businesses immediately and for Congress and federal agencies to direct financial institutions to increase their focus on small business relief using both SBA funds and the additional capital that the Federal Reserve has recently made available. We support Senators Collins and Rubio for their proposal to expand 7(a) funding.

While the federal actions to unlock small business funding are welcome, we are concerned that the speed with which these actions will flow to individual businesses may be too slow and too late to help save many businesses from being able to pay their rent, pay their employees, or manage unused inventory, particularly in light of the increasing shelter-in-place mandates across the country, which disproportionately affect SMBs. We ask that you consider requiring financial institutions to provide small business grants, bridge loans before SBA funding clears, or additional small business loan funds, consistent with maintaining a safe and sound financial system and consumer protection. As stated by the FDIC, “[t]he survival and growth of small businesses depends on access to credit, and banks are the most common source of external credit for small firms.”[3]

We also ask that you particularly consider the needs of women- and minority-owned small businesses when you design additional relief for small businesses, and temporarily extend to states and local entities the Supreme Court’s protection of preferential federal contracting opportunities for minority-owned businesses. Your committees are uniquely positioned to ensure the resilience of the many important small businesses in the country – and the livelihoods of those that work at those businesses.

2. Require financial institutions to waive discretionary consumer and SMB banking fees, such as those for overdraft, customer service, monthly account maintenance, and late payments.

We applaud the actions of many large and regional banks that have voluntarily begun waiving fees on bank accounts, as well as cities, states, and counties that have put in place moratoriums on evictions and utility shutoffs for both at-risk SMBs and consumers alike. We support the Department of Education for its actions in waiving federal student loan late payment fees and interest on loans. We also recognize the historic federal actions taken to provide immediate access to additional liquidity for the nation’s financial institutions. We think all of these actions will help individuals manage during this crisis.

But it’s not enough. SMBs are struggling to determine whether they can keep all of their service providers on staff and whether they can continue to pay business expenses like rent, utilities, and most importantly – people. The employees that work at SMBs and the consumers that shop at SMBs are similarly struggling right now to figure out how to pay for their next meal and make their rent payments. Every dollar that we can save them counts. We urge you to include in legislation a mandate that financial institutions waive fees where possible, including but not limited to: (i) overdraft fees (or some portion of overdraft fees) on a monthly basis, (ii) late fees related to SMB loan repayment, (iii) and other fees that directly relate to an SMBs ability to continue to employ their service workers, insure their workers’ families, and abide by relevant labor laws.

3. Open up an API to allow third-party businesses to facilitate SBA funding and explicitly permit direct SBA funding to certain custodial third parties.

We are working as quickly as we can to provide information about the SBA disaster loan availability to our small businesses. We appreciate that the SBA has been working around the clock to approve disaster applications from counties, cities, and states around the country. However, the only method of currently applying for SBA funds is through the SBA website (if elected into by a SMB’s home state) and waiting for the SBA review process. As a technology company, we are equipped to build new technology using application programming interfaces (API)s connected to the SBA portal to facilitate ease of use for consumers and SMBs. Our goal is to ensure that local communities remain intact and the highest number of eligible SMBs apply for this program. We ask that you require the SBA to open an API immediately to enable private companies to facilitate moving the funding into the hands of hurting small businesses as soon as possible.

We believe that opening up an API for us to help SMBs apply for SBA funding more quickly will be beneficial for Congress and SMBs and ask that you consider working with us – and other technology companies – to open up access portals to make SBA funding more seamless and more available for worthy applicants. To best make use of an open API, we ask that Congress explicitly allow technology and API-enabled custodians and powers of attorney – such as Gusto – to apply for SBA loans on behalf and in the name of eligible SMBs at no fee. During times of crisis like we are currently facing, no company should take a fee for connecting SMBs with the resources that are intended for them and their communities.

4. Require financial institutions to provide immediate forbearance for at least 90 days on existing SMB loans and consider longer-term modifications.

Similar to relief passed for federal student loan holders, we believe your committees members are in a unique position to act on another financial product underpinning economic stability: SMB loans. Congress took swift action during the 2008 crisis to stem the tide of foreclosures and require financial institutions to write down existing mortgages and to provide loan modification options to homeowners. We believe Congress should again take similar actions to keep SMB owners from being evicted from their spaces and allow for SMBs to restructure their loans for long-term stability. According to the Federal Reserve, approximately 43% of small businesses use credit to keep their businesses operating.[4] And prior to the COVID-19 crisis, SMBs were taking out loans at an unprecedented level – with small banks, financial technology companies, and large banks approving more small business loans than ever before.[5] This means our country’s small businesses are particularly vulnerable to an economic downtown, and that your committees have unique levers to offer relief from these small business loans during this crisis. We believe that temporary relief from the billions of dollars in debt that small business owners struggle with will make a meaningful impact on their survival.

5. Enable payroll companies to administer and distribute the SBA loans directly to small businesses and to distribute stimulus funds directly from the government to individuals and small businesses.

The payroll industry plays a unique role in managing the distribution of paychecks for millions of SMBs. Tax and payroll are two of the most outsourced functions at U.S. companies, with nearly half of all companies using a payroll provider for these services.[6] We can help the government get money into the hands of SMBs, and the families that rely on them, quickly and efficiently. We ask that you not only include meaningful stimulus for SMBs and individuals in the third COVID relief package, but direction for getting the stimulus to the recipients using the payroll system as well.

We propose these measures as specific, immediate action that can support SMBs as the backbone of our economy during this time. While this letter is urged at actions that will immediately relieve SMB on the financial front, we are equally committed to additional measures by Congress that will improve continued access to health care plans for SMBs during this time, and relief for payroll and other leave costs that SMBs may incur due to widespread outages of employees’ abilities to work.

Coordination among Congress and the SBA is key during this time – both amongst yourselves and with the business community. We stand ready as a resource specifically aligned with SMBs that can advise on these matters during this difficult time, and we appreciate your partnership and consideration of our recommendations.

Sincerely,

Joshua Reeves
Chief Executive Officer


[1] Available at https://www.rubio.senate.gov/public/index.cfm/press-releases

[2] https://www.sba.gov/sites/default/files/advocacy/2018-Small-Business-Profiles-US.pdf

[3] https://www.fdic.gov/bank/historical/sbls/full-survey.pdf

[4] https://www.fedsmallbusiness.org/medialibrary/fedsmallbusiness/files/2019/sbcs-employer-firms-report.pdf

[5] https://markets.businessinsider.com/news/stocks/banks-small-business-loan-approval-rates-hit-record-high-in-december-2019-biz2credit-small-business-lending-index-1028816509

[6] https://www.roberthalf.com/sites/default/files/Media_Root/images/rh-pdfs/accounting_finance_benchmarking_report_2016.pdf

Our COVID-19 Small Business Resource Hub has legislation updates, advice, and support.

Updated: March 27, 2020

Comments

  • Tony Martinez

    Thank you Joshua. Is it possible to API payroll data to the financial institutions so they can process the PPP loans faster?

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