Julie Verratti has a clear message for her fellow brewery owners right now: Get your legislators on the phone, today, and ask for relief for small businesses. She also has very specific ideas about what forms that relief should take.
Verratti is cofounder of Denizens Brewing in Silver Spring and Riverdale Park, Maryland, in the nearest suburbs of Washington, D.C. She also happens to be a former policy advisor to the U.S. Small Business Administration, giving her a deeply informed perspective on regulatory issues for small businesses. As brewery operators reach out to their officials at various levels of government—(also an action urged by the Brewers Association), see below—her perspective on what can be done is one worth heeding.
The hospitality industry is suddenly adrift in frightening, uncharted waters, roiled by the coronavirus and the widespread public response to blunt its impact. Across the country, bars, restaurants, and taprooms are shutting their doors. Many breweries are attempting to pivot toward to-go sales and gift cards in an effort to maintain any sort of cash flow.
Verratti—who spent the previous evening making home beer deliveries after she and her partners had to furlough 30 hourly workers—says that such measures will not be enough to keep most breweries solvent. She says that immediate government relief is necessary.
“There are so many things that the government could be doing right now,” she says. “The thing that I’m afraid of is that governments are still sort of acting in the same sort of time and pace that they do for normal legislation. And right now, everything needs to be break the glass, this is an emergency. All formal rules need to be put to the side, and drastic and immediate action, and bold and decisive action, needs to be taken right now.”
Verratti says that two things need to happen for small businesses such as breweries to survive this unprecedented situation: cash retention and cash infusion.
“So for cash retention, that means an immediate moratorium on all commercial debts, mortgages and rents, an immediate moratorium on all tax collections and payments for fees and licenses, etcetera, as well as all of that same stuff on a personal level,” she says. “So personal debts—I’m talking credit cards, car notes, personal mortgages, personal rents—these all need to be halted immediately, so that people and businesses can just retain as much cash as possible. Because what’s happened right now is that revenue has been completely shut off from a large amount of small businesses across this country. Anyone who’s retail-facing is not really able to bring in revenue, but their operating expenses are all the same.
“So businesses that have loan payments—which a majority of small businesses do, especially in the beer industry—those need to be halted. Banks should not be able to be taking thousands of dollars in cash out of these small businesses’ bank accounts right now. They need to be able to keep that money in their account, so they can pay their employees for as long as possible.”
On the federal level, Verratti says, what needs to happen is an immediate moratorium on all commercial debts, mortgages, and rents, followed by massive cash infusions in the form of direct grants to small businesses. Loans, she says, are not the best way to address the immediate problem.
“Anyone who is floating the idea that loans should be the solution for small businesses right now has never actually closed on a commercial loan, has never closed on an SBA loan,” she says. “SBA disaster loans take about six weeks to actually get the cash into the account of whatever business is applying for it, and that’s assuming all the paperwork is correct.”
But many small businesses, she says, do not have that kind of time. “The issue is that generally, when SBA disaster loans are triggered, it’s during some sort of natural disaster—like say, a hurricane, or a fire, a tornado or something like that—that rolls through an area. Usually in that situation, the small businesses are able to trigger their business interruption insurance, which will be an immediate cash infusion to stave it off—like in the very next few days right after the disaster.
“The problem is, pandemics are not covered by business interruption insurance. So in a normal disaster, you have private insurance that infuses cash right away, and then a few weeks later, the SBA loans kick in. Right now, there’s none of that private insurance money being infused into businesses. So if you’re saying that the SBA disaster loans are the solution, you’re going to see thousands and thousands of small businesses across this country go out of business before they can even access the SBA disaster loan funds.
“This is an emergency situation that is unprecedented, and unprecedented actions need to be taken by the government right now.”
Already many breweries, bars, and restaurants have had to lay off or furlough workers. A few have had to close—and this is only the beginning of the crisis.
“You’re already seeing devastation right now, but you’re going to see even more devastation over the next three to four weeks if they don’t do something immediately,” Verratti says. “Now, you remember, what day is it? It’s March 18. Most people’s bills have to be paid by the 1st, so you’re talking 13 days before all of this cash is taken out of people’s bank accounts by the landlords, by banks. We need to stop this immediately. They should have stopped it three weeks ago.
“This is why I’ve been making a call to action to everybody that I talked to, to reach out to their local officials, reach out to their state officials, reach out to their federal officials to take action immediately,” she says. “On the local level, local municipalities can maybe refund property taxes that businesses had to pay. Refund any of these small fees and licenses that have been due in 2020. Give that money back to folks. And if there are due dates coming up, don’t make people pay those fees or taxes or licenses. That’s one quick thing.
“On the state level, governors have to make sure that they’re declaring their states as actual disaster zones, so that businesses can actually start the application process with the SBA. That is a two-fold step: The SBA declares a natural disaster, and then the states themselves have to say, ‘Hey, we’re a part of that.’ They have to certify that their state needs that assistance. Until that next step is done, businesses can’t even apply for SBA funds.”
There is also a specific thing the government can do for all laid off or furloughed workers: enhanced unemployment.
“I think it needs to be 100 percent of their salary,” she says. “It shouldn’t be 80 percent. And states need to be ready for the onslaught of folks that are going to be applying for this unemployment. That’s also why I’m asking for all personal debts, personal mortgages, personal rents to be waived right now as well. Because it all trickles down. If folks are getting 80 percent of their salaries through unemployment benefits, how are they going to be able to pay their rent with only 80 percent of their salary if they’re living paycheck to paycheck?”
Low-wage workers are among the most vulnerable. “The thing that I’m also scared of is, if we’re not also helping out the small businesses, those jobs aren’t going to exist in three to four weeks. There won’t even be jobs for people to come back to. I use an analogy: You know when you’re on an airline, and the flight attendant says, ‘Hey, if you’re an adult traveling with a child, make sure you put your oxygen mask on first?’ This is the same sort of situation. We need to put the oxygen mask first onto the small business, so that we can then put the oxygen mask onto our employees.”
For her part, Verratti has been calling her senators and congresspeople, as well as her Maryland state delegates and senators and local county council people. “Every single day, I am calling every single one of these folks and just talking to them about all this stuff. I’m sending them emails. I'm doing everything I possibly can to lobby for these things.
“But the problem is, you know, I’m just one person,” she says. “We need everybody to be doing this. We’re all stressed out right now. We’re all pivoting right now. We’re all working 24 hours a day right now to try to save our businesses and save our employees. And to have to also on the side have to spend all this time lobbying folks to pay attention... I mean, the house is on fire right now. This is not a time to be taking surveys. This is not a time to be doing means testing. This is not a time to be requiring paperwork.
“This is a break-the-glass emergency situation. Just get cash into the hands of small businesses and people. Make sure that they’re able to retain as much cash as they possibly can as well.”
And she says, it has to happen quickly.
“You know, we want to get on the other side of this, and I am optimistic that we will if the government takes these drastic actions. I don’t feel optimistic at all for small businesses across the country if the government doesn’t take these actions as soon as humanly possible.”
BA Survey Highlights Challenges Ahead
Meanwhile, the Brewers Association today published the results of its survey of member breweries on the virus-related challenges they are facing. It received more than 600 responses in just two days. The goal of the survey was to collect data that could help direct and support the sort of lobbying efforts described above by Verratti.
“This is one of the fastest responses we’ve ever gotten to a survey,” says BA Economist Bart Watson. “I think it’s pretty clear that this is an existential threat for our brewery members, and they’re doing whatever they can to try to mitigate the horrible things that are happening.”
When asked about sales during these early days of the crisis, the average response was an approximate 60 percent drop. When asked if breweries expected to lay off workers, fewer than 10 percent said “no,” while about 58 percent said “yes.” Others were unsure.
Only about 10 percent said the crisis had yet to affect their production schedule, with the rest saying it had either slowed (64.1 percent) or stopped altogether (24.7 percent).
Respondents also ranked in order of preference 10 specific policy responses that would most help their businesses. The top response: Create a compensation fund for businesses affected by the crisis. The second-most preferred response was to suspend payroll taxes, while the third was to guarantee paid leave for workers whose employers have had to shut down because of quarantines.
Watson says that specifically, the BA is lobbying for direct monetary relief, loan deferments, paid sick and quarantine leave, and a suspension or deferral of federal excise taxes. He also says that they are also in direct communication with the state brewers’ guilds, with guidance for lobbying at the state level.
Like Verratti, Watson also is urging brewers and small business owners to call their policymakers.
“Share your story, letting them know how painful this is, not just over the next year but over the next month,” Watson says. “I think it’s critical, and helping lawmakers understand how quickly they need to frame this response.”