CARES Act brings relief, confusion to Columbus small businesses
The rollout and implementation of the federal government’s coronavirus relief program has been far from perfect, with local small business owners describing everything from difficulty acquiring funds to uncertainty about the terms of the loans, which are designed to be forgiven if certain benchmarks are met.
Wolf’s Ridge Brewing co-owner Bob Szuter has a background in finance, and even he hasn’t been able to fully ascertain details of the loan the brewery secured through the Payroll Protection Program (PPP).
“I’m struggling with this,” Szuter said. “So I really feel for the folks who don’t want to deal with the million scenarios that they have to run in their head in [determining] whether or not this program is going to be a good thing for them.”
“I have to be honest, it was awesome to get the PPP, but the process was so convoluted and confusing,” saidBlake Compton, CEO of Compton Construction. “Even to the point that when we knew we were approved, we still didn’t know how or when we would get the money. And then we logged into our account one Monday and it was there.”
The PPP, created via the Coronavirus Aid, Relief and Economic Security (CARES) Act, has made a $659 billion pool of federal loan money available to small businesses struggling in the COVID-19 era. Individual loans can be made in amounts up to $10 million, which can be forgiven if certain criteria are met, including spending 75 percent of the loan money for payroll purposes, with the remainder going to utilities and rent or mortgage interest payments. The business must also meet certain qualifications for accepting the loan. The most recent U.S. Treasury guidelines, updated in April, state that the business must prove “current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.”
In addition, the loan must be spent in an eight-week window that starts upon approval, an aspect of the program that has caused issues for some businesses, a number of which are currently closed or operating under heavy restriction during “stay at home” orders.
And that’s all assuming the business was even able to secure a loan.
The initial wave of funding was met with intense criticism after countless mom-and-pop shops were denied access at the expense of publicly traded companies such asRuth’s Chris Steak House and Shake Shack, which sought and received $10 million or more apiece, funds that have sincebeen returned amid intense public backlash. In late April, Reveal from the Center for Investigative Reportingcompiled data showing that only 33 percent of qualified businesses in Ohio had managed to secure a PPP loan.
Faith Pierce, co-owner of Yellow Brick Pizza and Olde Towne East bar The Oracle, said that the business never received a reply on the initial $163,000 loan application it submitted with Chase Bank. Eventually the business was able to secure funding in the second PPP wave via WebBank, a small, Utah-based bank that it had previously used to finance a new point of sales system in 2017. In a follow-up message, Pierce said the loan would allow the pizzeria toexpand delivery services to its King Avenue location, as well as hire back Oracle staffers for a new alcohol delivery service.
Get news and entertainment delivered to your inbox: Sign up for our daily newsletter
Sangeeta Lakhani, co-owner of Short North restaurant The Table, received a PPP loan through Huntington Bank during the first round of funding, but was initially hesitant to disclose it, uncomfortable with her seeming good fortune as she heard from numerous industry friends whose applications were denied. As of early May, Lakhani still hadn’t utilized the loan, unsure how she could reach the benchmarks required for forgiveness while operating a restaurant under current restrictions and unwilling to take on new debt amid the long-term uncertainty gripping the bar and restaurant industries.
“If you start off doing 25 percent of the business you were [prior to the coronavirus], you’re not going to bring back your whole staff for that, so how do you spend 75 percent of this loan money to retain a quarter of your labor?” said Lakhani, who has continued to run carry-out dining from her restaurant in addition tohelping launch Service!, a charitable program created to feed hospitality industry workers stung by the current economic crash. “I’m scared to touch this money, so we haven’t. … And at the end of the eight weeks, I might just return it.”
Even Wolf’s Ridge, which hascontinued brewing operations and carry-out dining, in addition to increasing its canned offerings and launching a new beer delivery service, has struggled to meet the terms required for forgiveness. According to Szuter, to have the loan forgiven, the brewery would need to employ the equivalent of 65 full-time staffers by the middle of June.
“And, as it stands, our business doesn’t nearly necessitate 65 full-time people,” said Szuter, noting that the staff currently falls somewhere around 50 full-time employees. “For us to do that, and on this arbitrarily weird eight-week timeline, it doesn’t make sense. … So the question is, OK, if we don’t need [the workers], do we hire them and hold them until the end of June and then lay them off on July 1? Because, as we understand it, that’s something we could do to get full loan forgiveness. And we don’t want to do that.”
Szuter said he directed these concerns to Republican Rep. Steve Stivers during a recent telephone townhall, and Stivers replied that, as currently constructed, the PPP program wasn’t set up to benefit the hospitality and tourism industries, which a spokesperson for Stivers described as an accurate recollection of the exchange. “And that shocked me,” Szuter said. “Because of all the industries, we’re one of the only ones that depends on people moving about and coming in and drinking and buying food, and to have a program that isn’t designed to help our industry, that didn’t make sense to me.”
“The PPP has been an important lifeline for many small businesses, but it isn’t perfect,” Stivers said in an emailed statement issued in reply to an inquiry fromAlive. “While the best thing we can do for businesses, especially restaurants, is to safely reopen the economy, I am also open to fixes to the program in order to better serve the industries hardest hit by this crisis.”
But even industries better suited to the program said the benefits are relatively short-term, offering a two-month stopgap during a crisis that has shown little signs of abating.
Blake Compton of Compton Construction said that the PPP loan the company secured through Heartland Bank has allowed it to keep 13 of the 19 full-time employees it had prior to the pandemic, though he remained uncertain what staffing might look like once acquired funds run out.
“In construction, all we really do is sell optimism,” he said. “And when the world doesn’t have optimism, or hope that things are going to be better tomorrow, then they’re not expanding and they’re not starting businesses, and then our services aren’t needed.”
Everyone interviewed described the PPP as an imperfect but needed first step, but noted that additional relief would likely be necessary in the coming weeks and months. Compton, for one, said he would like to see more financial relief directed to individual taxpayers, along the lines of the universal basic income program proposed by former Democratic presidential candidate Andrew Yang, while Szuter said additional funding for businesses could be necessary for any recovery.
“This is definitely just the first step because it’s not realistic to think we’re going to have a full tap room or a full dining room for the foreseeable future [owing to social distancing requirements],” said Szuter, who at a minimum would like to see changes made to the current PPP to make its funds easier for bars and restaurants to utilize. “For us, we’re just hoping there’s additional support coming down the line that’s going to allow us to keep going.”