Developing Rapid-Response Plans for Cities to Help Entrepreneurs and Small Businesses in This Time of Economic Crisis

March 27, 2020 | By

Christopher Gergen, Forward Cities CEO

As the extent and impact of COVID-19 becomes more apparent, entrepreneurs and small businesses are on the front lines of its devastating impact–and with their demise comes potentially catastrophic economic losses for local communities. According to JP Morgan Institute, 50 percent of small businesses have less than 30 days of cash on hand. With 50 percent of Americans working for or owning a small business, the failure of our small business economy could have a widespread and long-standing impact on our unemployment rates and put even greater financial stress on families who are already on the financial brink. This is particularly true of Main Street businesses and families in under-connected and under-resourced communities.

During the Great Recession, business failures rose faster than business starts and startup rates fell to a record low. In the ensuing years, entrepreneurship in America struggled to recover. As the Economic Innovation Group states, “the startup-less recovery revealed one of the glaring failures of the response to the Great Recession.” With new businesses contributing significantly to net new job creation, we cannot afford to make this mistake again.

The federal government is currently mobilizing a multi-faceted response to COVID-19. As of this writing, the specifics are still in flux but it will include a stimulus package for small businesses.  Hopefully, it will match the scale of the challenge at hand and be appropriately designed and directed to address both the liquidity and long-term solvency challenges of small businesses. In a recent paper responding to the crisis, the Economic Innovations Group lays out a set of spot-on recommendations including:

  • Leveraging commercial banks and local lenders like Community Development Financial Institutions (CDFIs) to identify and underwrite eligible small businesses for long-term, zero/low interest loans which the federal government can help insure and pay to underwrite;
  • Allowing small businesses to collateralize these loans with personal guarantees; and
  • Starting with three months of no payments on the loans with the possibility of extending this period as needed–and allowing these funds to be used broadly such as maintaining payrolls, refinancing existing loans, purchasing equipment, paying rent, etc.

To avoid exploitation of this system by the banks it is also recommended that loan sizes should be limited and targeted to qualifying small businesses that can demonstrate significant revenue losses due to the virus impact (i.e. 25 percent or more) which can be verified in 2021 tax returns. But the underlying message is that this needs to be done quickly and efficiently, helping small businesses not only deal with immediate cash shortfalls (liquidity) but put them into a position for a quick return to business and growth post-crisis (long-term solvency).

A successful resiliency plan, however, requires cities to be ready to respond to this type of stimulus. As the Nowak Metro Finance Lab at Drexel University recently wrote, “cities need to organize economic stabilization teams… to offer short-term, focused relief until the federal government can offer some direct relief.” These stabilization teams also need to be prepared to make sure that resources are being effectively and efficiently deployed and that entrepreneurs and small businesses are not only getting financial relief, but relevant technical assistance and support to help them access these resources, stabilize their businesses, adjust to new business realities (such as shifting to a virtual distribution/ sales model), and tap into a community of support.

At Forward Cities we are working with a growing number of communities to foster cross-sector teams committed to strengthening their equitable entrepreneurial ecosystems. It is this form of connected, community collaboration that is going to be critical to responding quickly to the immediate needs of entrepreneurs and small business owners in the community, especially those most vulnerable to these economic shocks. Importantly, these cross-sector teams need to be diverse, inclusive, and culturally competent–engaging institutional partners such as city government, local philanthropy, and business leaders as well as valued voices from diverse entrepreneurs and entrepreneurial support organizations (ESOs) who can offer unique perspectives from their lived experiences.

With this type of cross-sector team in place–ideally fueled by catalytic philanthropic and public capital–cities can:

  • Understand the impact that COVID-19 is having on the local small business economy through real-time data collection including surveys and focus groups with local entrepreneurs and small businesses to understand immediate needs;
  • Launch a rapid-response network of ESOs, ideally through a coordinated digital platform, to a) share their capabilities to support local entrepreneurs through an accessible resource guide, b) articulate what capacity building help they need to better support local businesses in this time of crisis, c) share data and act as a referral network, and d) provide input into a city-wide resilience plan including the support/resources they can provide to help a city leverage state and federal resources;
  • Identify municipal policy and local finance/philanthropic tools to immediately help small businesses such as micro-loans, debt relief, support with rent, direct social service delivery, etc.;
  • Set up or leverage a digital communications platform that helps small businesses connect with resources, a community of support, and a storytelling platform that can personalize and amplify the work, products, and needs of small businesses;
  • Develop a coordinated plan that anticipates federal and state stimulus dollars to ensure that they have the intended stabilizing effect including identifying participating financial institutions, helping small businesses quickly understand and access these resources (especially those in under-connected communities) , and developing a “network of resilience” among service providers who can help businesses develop and deploy strategies for stabilization and long-term solvency and sustainability; and
  • Evaluate the impact of these efforts, including increased access to capital, on stabilizing local entrepreneurs and small businesses across all demographics and geographic areas.

Additionally, with crisis comes opportunity. As disruptive as COVID-19 is, new entrepreneurial opportunities will open up because of it. It will also undoubtedly produce more “necessity-based” entrepreneurs who need onramps and support to help them get started. Cities need to be ready to harness this creative energy as part of their response plans.

At Forward Cities we are committed to being a resource for cities ready to take these steps and fostering opportunities for shared learning and collaboration between cities, and we are keen to collaborate with funders and other regional and national organizations who share this commitment. The time for action is now. With every passing day and week, more small businesses are going to close and stay closed, resulting in years of recovery. But if cities can deploy a well developed rapid response plan we have an opportunity to take on this challenge head on and hopefully head off a complete economic collapse.

In a time of crisis, we have always been at our best when we come together. Across the country, communities are already demonstrating a willingness to take action with the federal government hopefully following suit. The more this can be done in a coordinated fashion the better off we will all be.

Christopher Gergen is CEO of Forward Cities he can be reached at