In light of economic downturn due to the coronavirus pandemic, Oklahoma state officials say many businesses will turn to the U.S. Small Business Administration for low-interest loans. Unemployment claims in the state are also at a high as workers are laid off. Journal Record editor Russell Ray discusses the specifics of SBA loans and the state's unemployment trust fund.
Full transcript:
Drew Hutchinson: This is the Business Intelligence Report, a weekly conversation about business news in Oklahoma. I’m Drew Hutchinson. Joining me is Russell Ray, editor of The Journal Record. How are you, Russell?
Russell Ray: I’m good, Drew. Thanks for having me.
Hutchinson: Of course. So this week, we’re talking about the coronavirus pandemic’s effect on businesses -- especially small businesses -- and their employees. Oklahoma’s secretary of commerce and workforce development, Sean Kouplen, said around 10,000 businesses in the state may have to turn to the Small Business Administration for loans as a result of COVID-19.
Ray: Well that’s right, Drew. These low-interest loans are called Economic Injury Disaster Loans. Small businesses and nonprofits can apply for a loan of up to $2 million through the U.S. Small Business Administration. The money can be used for fixed debts, payroll and other expenses the business would have had with or without the current healthcare crisis. All small businesses are encouraged to apply for these loans. Eligibility is based on financial impact, and the interest rates are 3.75% for small businesses and 2.75% for private nonprofits. Kouplen estimated some 500,000 businesses across the U.S. may apply for loans from the SBA.
Hutchinson: Recently, President Donald Trump announced that the SBA would act as a clearinghouse to distribute around $50 billion in loans to help struggling businesses. As Journal Record reporter Steve Metzer mentioned in a recent story, small businesses employ nearly half of the American workforce. These loans could be a lifeline for a few reasons.
Ray: Yes, that’s right. At some point, businesses will run out revenue. So these loans could be the difference between staying in business or declaring bankruptcy. According to one study cited by Business Insider, more than 15 million small businesses in the U.S. have only 15 days of cash reserves.
Hutchinson: The closing of small businesses, temporary or permanent, has also resulted in a record number of claims for unemployment benefits from laid-off workers. Oklahoma Employment Security Commission Executive Director Robin Roberson said the Department of Labor recently issued guidance not to release the most current numbers on these claims. But she said from her perspective, the claims last week easily surpassed historic levels.
Ray: And in fact they did. In fact, the number of claims filed in one week rose to a 30-year high with more than 17,000 claims filed in the week ending on March 21 here in Oklahoma. The previous record was more than 9,700 in January 1991. The state’s unemployment trust fund is a little more than $1 billion. According to the commission, Oklahoma ranks seventh in the nation in the solvency of such funds. But tax revenues that go into the fund are in decline. And like every other state, Oklahoma is seeing a big surge in unemployment claims right.
Hutchinson: Under current circumstances, is there any insight into how long this money could last?
Ray: Well It’s hard to say. That would depend on several variables: the rate of unemployment, the length of the downturn, the effects of stimulus funding and many other factors. According to the commission, if unemployment in Oklahoma were to rise to 7.5% in the next month and stay there, the trust fund would likely be exhausted in 25 weeks, according to the commission.
Hutchinson: Those numbers are unsettling with the uncertainty we’re all living in. But OESC director Robin Roberson said her department is working hard to help Oklahomans and businesses through these tough times. Since their offices are closed due to pushes for social distancing, Roberson said she encourages people to visit ok.gov/oesc to file an unemployment claim or access forms or data. And other state entities are working on some plans to help citizens, as well.
Ray: Yes. That’s right. The state is working on several things. One example is the state is working on guidance that could help businesses stay open safely as the crisis could take weeks or even months to subside.
Hutchinson: Russell, thank you so much for talking with me today.
Ray: My pleasure, Drew. Thank you.
Hutchinson: Russell Ray is editor of The Journal Record. KGOU and The Journal Record collaborate each week on the Business Intelligence Report. You can follow us both on social media. We're on Facebook, Instagram and Twitter: @journalrecord and @KGOUnews. The story we discussed today is available on JournalRecord.com. And this conversation, along with previous episodes of the Business Intelligence Report, are available on our website, KGOU.org. While you’re there, you can check out other features and podcasts produced by KGOU and our StateImpact reporters. For KGOU and the Business Intelligence Report, I'm Drew Hutchinson.
The Business Intelligence Report is a collaborative news project between KGOU and The Journal Record.
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