Small businesses navigate complexities of now-depleted Paycheck Protection Program

David Floyd • Apr 19, 2020 at 6:00 AM

With Congress now debating conditions for restoring funding to the program, cash-strapped small businesses across Tennessee have been navigating the process over the past two weeks of acquiring money through the Paycheck Protection Program.

The $349 billion program, approved under the $2.2 trillion stimulus bill last month, offers forgivable loans totaling up to $10 million to small businesses that have faced economic hardships caused by the novel coronavirus (COVID-19) outbreak.

According to the Tennessee Bankers Association, banks across the state have processed 34,035 loan applications and issued more than $6.5 billion in loans to small businesses in Tennessee through the PPP.

However, now that the fund is depleted, the U.S. Small Business Administration won’t accept new loan applications until funding is restored. Unless they were approved before funding ran out, Shawn McKeehan, deputy director at the SBA Tennessee District Office, said loan applications in the queue will have to wait until Congress approves new money for the program.

“If they (business owners) didn’t get (an SBA loan number) or a notification from their bank that they had been approved by the time the funds were exhausted, they won't get anything until that funding is appropriated,” McKeehan said.

McKeehan said the SBA is hopeful Congress will do that.

Businesses have been applying for PPP loans through lenders certified by the U.S. Small Business Administration. According to the agency, the money must be spent on payroll, interest on mortgages, rent and utilities to be fully forgivable. At least 75% of the forgivable amount must be spent on payroll.

At a time when many local entrepreneurs are simply trying to keep their businesses afloat, Mark Bays, with the Tennessee Small Business Development Center, said the program’s depletion has a significant impact.

“It definitely creates more unknowns when we’ve already had plenty of unknowns that we've had to deal with in business,” Bays said.

Adapting to changes

When John Henritze, the owner of JRH Brewing on West Walnut Street, initially sought to apply for funding under the PPP, the institution he banks with told him they weren’t accepting any more applications.

They referred him to another lender, and Henritze said he was ultimately able to submit an application for a loan in early April.

As of Wednesday, Henritze was waiting to receive money under the program. He said Friday, the day after funding ran out, that he wasn’t sure if the depletion of the PPP fund had impacted his application.

Henritze said most of JRH’s business, which is now down 75% since the outbreak, is currently coming from curbside pickup.

Although people can stop by to pick up to-go orders, Henritze said the brewery’s taproom, its main source of income, is closed to sit-down customers, and JRH is limiting the space to a maximum of five people at a time.

According to the Small Business Administration, businesses and non-profit organizations with a maximum of 500 employees can apply for a PPP loan, but entities with more than 500 employees can also apply under certain circumstances.

Henritze said he was concerned that funding available through the PPP would end up going disproportionately to companies that fall on the larger end of that spectrum.

Referencing reports about federal aid being provided to the Ruth’s Chris Steak House chain, which according to CBS News has more than 5,000 employees and received $20 million through the PPP, Audrey Depelteau, director of the Innovation Lab at East Tennessee State University, said there have been questions about the equity of the disbursements of these funds.

Bays said it’s tough to see large businesses getting these large sums of money, which depletes the available funding, but added that, on the flip side, these companies are also employers.

Just hopes

About two to three weeks before establishments in Johnson City started closing, Nathan Brand, a co-owner of Timber! on West Walnut Street, said business at his restaurant had dropped about 80%.

The restaurant has been closed for about four weeks now, shutting its doors right after Tennessee Gov. Bill Lee and Johnson City issued orders closing non-essential businesses and restricting non-essential travel.

To keep their options open, Brand said the owners have applied for both an Economic Injury Disaster Loan and funding under the PPP. On Wednesday, Brand said it had been about two weeks since they had applied, adding that they had been told their loan application had been received and was being processed.

“We don’t really have any answers at this point,” he said Wednesday. “Just hopes.”

As of Friday, Brand said he and his co-owners didn’t know how the depletion of the PPP would impact their loan application.

“We aren’t sure, as we haven’t heard anything,” Brand said by text. “Extremely frustrating.”

On Wednesday, Dick Nelson, the owner of Nelson Fine Art and Dos Gatos Coffee Bar in downtown Johnson City, said the process for applying for a loan under the PPP had been easy, noting that the application was quite short.

“We’ll see if it’s easy to be approved or if that”s different,” he said Wednesday. “I don’t know the answer to that, yet.”

With the money available through the loan, Nelson, who had to temporarily lay off nine people at Dos Gatos, said he was planning on bringing people back to work.

On Friday, Nelson said he learned his application was missing a piece of info, meaning he was set back. With the first round of money gone, Nelson plans to get his application in the queue in time for the next one.

With the rush to make aid available, Bays added that there’s also been some lack of clarity on guidelines for federal assistance, such as those for independent contractors.

“This is such a fluid situation and I think that adds to the frustration and complexity of this is that everything is moving so quickly at a time when we’re very impatient,” Bays said. “We were impatient before COVID-19, but you add financial pressure on top of that, and this is almost a perfect storm.”

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