Helping Small Businesses Survive: There is much that states and communities can do to stop the hurt.

AuthorJohnson, Sharon

When COVID-19 exploded in Tennessee in March 2020, it shattered daily routines, confined people to their homes, and increased financial stress.

"Our clients, who were trying to put substance abuse behind them and were battling anxiety, depression, and other mental health conditions, faced enormous challenges," says Christi A. Davidson, founder and executive director of Customized Medical Needs, a treatment center in Memphis which serves mostly low-income people of color.

"To alleviate the aftershock of the pandemic," Davidson relates in an interview, "we stepped up our efforts to provide intensive outpatient treatment and inpatient services for substance abuse."

As the pandemic dragged on, the eight-year-old treatment center found itself in dire financial straits. Its prudent reserve plummeted as reimbursements by public and private insurers disappeared.

But Customized Medical Needs was not alone. The number of active small business owners in the United States decreased by 3.3 million (22 percent) from February to April 2020, according to a 2020 report by the National Bureau of Economic Research. The drop in active business owners was the largest on record.

The toll on "diversity businesses" owned by people of color, women, veterans, and disabled folks was especially severe. African American businesses experienced a 41 percent drop in business activity. Female business owners reported a 25 percent decrease.

"Staff retention was my top priority," Davidson says. "The job market had collapsed in Memphis. The nine employees would be unable to support their families if they lost their salaries and benefits."

Davidson, who has an M.B.A., studied every expenditure to determine where she could save a few dollars. Swallowing her pride, she convinced vendors to continue to work with her and wait to be paid.

But by October, the treatment center was on the verge of closing. That's when Davidson learned about the Tennessee Supplemental Employer Recovery Grant program. This was the third phase of Republican Governor Bill Lee's plan to use the states share of federal COVID-19 relief funds to help small businesses survive closures during the pandemic.

Even before the pandemic, Governor Lee, the owner of his family's construction business, had emphasized the importance of aiding small businesses. In 2017, Tennessee's small businesses employed 1.1 million people, or 42.1 percent of the private workforce. Small businesses created 40,374 net jobs in 2019, with firms with fewer than 20 employees seeing the largest gains.

Unlike the previous awards of $300 million, which had helped 40,000 struggling small businesses, the employer...

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