US businesses in limbo as federal financial lifeline runs out
Companies struggling to survive are hoping Congress will give them a second chance at the PPP, which ends on Saturday.
Small businesses in the United States are in limbo again as the coronavirus outbreak rages and the government’s $659bn relief programme draws to a close.
Companies still struggling with sharply reduced revenue are wondering if Congress will give them a second chance at the Paycheck Protection Program, which ends on Saturday after giving out 5.1 million loans worth $523bn. While the programme that began on April 3 has gotten mixed reviews, business owners still need help as the virus continues to spread and hamstring the economy.
“They’ve exhausted their funds and are looking for a round two,” says Molly Day, a spokeswoman for the National Small Business Association, an advocacy group.
Congress is debating further help for small business as part of a broader coronavirus relief package. One proposal would allow the hardest-hit businesses, those whose revenue is down at least 50 percent, to return for a second PPP loan; there is still more than $100bn in unclaimed money in the programme.
Some businesses are already expressing concerns. For example, the 50 percent requirement will leave out many small businesses, says Sean Kennedy, an executive vice president at the industry group National Restaurant Association. Many hard-hit groups such as restaurants have managed to keep some revenue flowing in but still need a financial lifeline.
“At that level, only about 45 percent of restaurants would qualify. A second round of PPP will make or break these restaurants,” he says.
At the moment, negotiations on the relief package have bogged down over unrelated issues including unemployment benefits for laid-off workers.
When the PPP was created, the widespread expectation was that the pandemic would subside by the summer, businesses would reopen and life would return to some semblance of normality. That is why Congress mandated that businesses use the money within eight weeks or forfeit the chance for loan forgiveness.
Instead, late spring and summer brought a resurgence of the virus in many parts of the country as companies reopened. Many restaurants are either closed again or operating with severe restrictions on the number of diners they can serve. Sales are down at many retailers as customers would rather shop online than take a chance on an in-person visit. And companies that cater for weddings or produce corporate events have little or no revenue as gatherings have been cancelled, some of them for the rest of this year.
If Congress were to allow businesses to get a second PPP loan, I would drop everything and apply immediately.
Many businesses spent the PPP money to meet the terms for loan forgiveness, although they would have been better served saving it. (Congress later gave businesses 24 weeks to spend the money but it was too late for many.) Five months after the pandemic hit the US, they need another loan.
Business is only 25 percent of normal at Coach’s Corner, a restaurant in Elk Grove Village, Illinois, that used to be crowded after Little League and high school football games. A PPP loan helped co-owner Sue Remien hire back her 18 full and part-time staffers, but when the money ran out, she had to lay six off again. Business is limited by social distancing and is unpredictable because many customers are still uneasy about dining out.
“One day is gangbusters – everyone wants to come on a Friday night, then Saturday is nothing. I wonder if I can keep the doors open,” she says.
Remien is interested in a second PPP loan but wants to be able to use the money for expenses besides payroll, rent and insurance – the only costs allowed to be paid for under the original programme. She has bills to pay while revenue is down.
While restaurants are among the hardest hit because of their extended shutdowns, other companies were able to get more benefits from the loans.
“There were challenges at the outset but once it got up and running, it really did what it needed to do,” says Chris Netram, a vice president at the National Association of Manufacturers, an industry group whose members include thousands of small businesses. But, he noted, many manufacturers need more help.
They've exhausted their funds and are looking for a round two.
The loan Jim Kolea got for his truck repair business helped keep 30 staff working although the trucking industry was hard hit by the pandemic; as manufacturers and retailers shut down, there was less need for trucks and in turn, less need for maintenance.
“Freight definitely declined for some of our customers and therefore we lost about 50 percent of our business,” says Kolea, owner of PennFleet, based in Boothwyn, Pennsylvania. With the economy struggling, Kolea’s business is still down, and having spent all his loan money, he is hoping for a second loan.
Yael Krigman did not have to close her Washington, DC, bakery but sales to hotels, corporate events and parties vanished and the four-month shutdown of the nearby National Zoo cut into revenue from walk-in customers.
Krigman laid off staffers and rehired them when she got a PPP loan, but that money has been spent. She is staying in business because she has changed her product mix, focusing more on comfort foods like bagels, and selling more online.
Still, Baked by Yael’s revenue is still sharply lower, and Krigman says, “it’s not good, and it’s definitely not sustainable”.
“If Congress were to allow businesses to get a second PPP loan, I would drop everything and apply immediately,” she says.