(Reuters) – Two weeks. Maybe a month.

Small businesses in the United States say promised aid from the Federal government and Federal Reserve is good news in the battle to stay afloat during the coronavirus crisis, but must hit its bank accounts quickly if it is to make the cut. difference as they barter with owners, keep tax receipts, haggle with vendors, and hope staff on leave can get by on unemployment assistance.

“We can’t pay all the bills related to our business – the internet, the dishwasher, our compost,” said Terry Sok-Wolfson, who has already closed his bar and two restaurants in the Oakland, Calif., Area. the third can survive for perhaps two weeks on the basis of its meager cash reserves. Out of 30 employees, 24 were made redundant.

For millions of small American businesses, where personal assets are often pledged to secure commercial loans and the underlying credit cards for cash flow, the next few days will be critical in determining whether a historic federal bailout effort limits the economic damage from the ongoing health crisis. Otherwise, “Main Street” businesses will take the brunt of a rapid and unprecedented shutdown in the US economy.

The speed with which loans can be made could determine whether the economic fallout from the current crisis becomes as deep and persistent as it was when a housing bubble collapsed in 2007 and triggered a financial crisis and recession. two years.

Legislation approved by the Senate and expected to be passed by the House this week includes roughly $ 350 billion for small business loans and nearly $ 450 billion that the U.S. Federal Reserve could be allowed to extend to more than 4,000 billion dollars in assistance to small and medium-sized businesses. companies.

The programs align with Small Business Administration loans intended to allow businesses to cover salaries, rents and other expenses through June. Much of this debt needs to be written off if companies keep their employees on the payroll.

Details of a Fed’s “Main Street Business Loan Program” are expected to be announced shortly after the emergency legislation pending in Congress passes. Fed Chairman Jerome Powell said on Thursday he was supposed to make the eventual restart of the economy “as strong as possible.”

The Fed’s program is expected to target companies with between 500 and 10,000 employees, with further steps being taken to help larger companies and the SBA to help smaller ones.

Treasury Secretary Steven Mnuchin said on Wednesday the goal was to make financing for small businesses as easy as “you walk into a bank, you get a loan instantly. It covers your payroll. You hire people. It is forgiven.

The instant loan would be a big change from the current system, where SBA loans can take anywhere from 60 to 90 days.

SHORT SHOCK OR BIG RECESSION

In the most recent recession, the number of U.S. businesses fell by more than 100,000 from 2008 to 2010 and the number of jobs fell by 8.5 million, with disproportionate losses among mid-sized companies in the construction industries. and manufacturing.

This period could be different as the economic shock hits harder the service and hospitality sectors where public contact is part of what is sold in restaurants, bars, hotels, theaters and retail stores which are the foundation of the American consumer society.

The St. Louis Fed estimates that 46 million workers who have “high contact” with the public could find themselves unemployed in the coming weeks – now with the aim of reducing their working hours as short as health problems allow it, and with compensatory benefits such as unemployment benefits.

A record 3.3 million people applied for unemployment benefits last week alone.

On the bright side: if the shock is short-lived, they can quickly return to work in roughly similar roles, unlike in 2008, when long-term unemployment also rose and workers sometimes found that they didn’t. were not qualified for jobs in factories that had been redeveloped during the recession.

A THIN CUSHION

Research from the JP Morgan Institute has shown some resilience among small businesses. Studies of events involving hurricanes, for example, have indicated that companies have lost considerable amounts of revenue, but have also significantly reduced expenses, reduced losses and managed with only a small amount of damage to their cash reserves. .

But the tampons are thin. In a study of 600,000 businesses, only half had enough money to cover expenses for 27 days. That means it probably takes around a month for homeowners to face more debt, more personal financial risk, or a career change.

Manufacturers, who have suffered sequential shocks since the early 1990s due to globalization as well as the recession, may actually be better off this time around, assuming the downturn is short-lived.

Many are still filling existing and inbound orders, and can better manage the health risks of ongoing operations given their control over factories.

Look Trailers, based in Middlebury, Indiana, has downsized at four of its six factories and laid off 400 of the 525 workers, who are now eligible for unemployment benefits.

But general manager Matt Arnold said the assumption is that demand will increase thanks to the slowdown and that its dealer network will be able to fund inventory once the rebound begins.

“Everyone just put people on leave and are waiting for it to turn positive… It’s not like 2008,” he said. His company’s bank line of credit is sufficient to get him through the crisis, he said.

In contrast, San Francisco art supply retailer Howard Flax laid off its 18 employees after authorities issued a shelter-in-place order. He’s now bringing back two to help him run a go-only operation in one of his stores. He thinks he can negotiate with his landlord, delay insurance payments, and make other adjustments as he plans to apply for an SBA loan.

He has other issues: only about two weeks of stock on hand and a supplier in New Orleans that had to shut down.

Assuming the shutdown continues, help will need to arrive soon.

“Getting a loan is not something small businesses want to do,” he said. “It will be the hardest part on the road, but if it’s the only option, you do what you have to do. “

Graphic: Fed and Congress aim to bypass 2008 interactive replay

Chart: Fed and Congress aim to bypass 2008 replay