The federal Small Business Administration and banks across the country are spearheading the effort to get almost $350 billion in guaranteed paycheck protection loans to small businesses that have been devastated by the economic fallout from coronavirus.
According to data from the SBA, as of Thursday, more than 18,000 Oregon businesses have been approved for Paycheck Protection Program loans, amounting to $3.8 billion. The program ran out of money on Thursday but Congress is working to provide an extra $250 billion, the Washington Post reported.
From record shops to electric vehicles manufacturers, companies in Eugene are applying for the loans as their businesses have slowed and employees have been furloughed.
Here’s how the program works: The SBA loans are distributed through banks, according to The New York Times, and borrowers will be forgiven if they use up to 75% of the money to keep full-time payroll rates before the pandemic for eight weeks.
The loans are guaranteed by the SBA and banks will not have to keep them on their books unless they are not forgiven, said Jenny Bennett, a spokesperson for Eugene-based Summit Bank.
The PPP loans are part of the $2.3 trillion CARES Act passed by Congress in late March. Other parts of the CARES Act include one-time $1,200 checks to Americans earning up to $75,000 a year; however, the language of the bill excludes those who could be claimed as dependents.
Portland-based Umpqua Bank is one of many banks across the country helping businesses with the rollout of the PPP loans.
As of Thursday, April 9, Umpqua had received more than 7,000 applications for the program and as of Monday, about 2,000 of those loans had gone through the process, said Eve Callahan, Umpqua’s chief communications officer.
“The minute [the CARES Act] was signed we put in place a SWAT team that worked around the clock for a week to get us ready to accept applications,” Callahan said. “The demand has just been unbelievable.”
Callahan said that as of Monday, more than $550 million has been distributed to applicants and that Umpqua has seen demand for businesses across all sectors, but retail, hospitality and restaurants have been hit “incredibly hard” by the economic disruption from COVID-19.
Statistics from the SBA show that the accommodation and food services sectors accounted for 8.9% of all funds distributed to businesses across the country.
“We understand the incredible disruption that small businesses are experiencing across the country. Small businesses are the lifeblood of the US economy and our number one priority at Umpqua is helping them get through this crisis,” Callahan said. “We’ve been asked to serve an essential role and we want to do that,” she said.
Summit Bank, which focuses on lending to businesses, is in a similar position as Umpqua: Things are busy and employees are working around the clock.
Summit received hundreds of applications since the program opened on April 3, and while the bank does not have final numbers on how many loans have been approved, it has “helped a couple of thousands of people in Eugene/Springfield retain their jobs or go back to work,” said Bennett.
David Bong is one of those individuals who received a loan for his business, Avant Assessment, which provides spoken, written, verbal and listening proficiency tests for 36 foreign languages. A major source of revenue for Avant is providing these tests to school districts across the country, many of which are now closed due to COVID-19.
“They’re all shut and this is our peak testing season, in the spring. We’ve had to be really nimble and come up with new ways that students can take the test and take them at home and retain the integrity and value of the test,” Bong said.
Avant employs about 40 people, and Bong said that while management took a 40% pay cut, his employees did not. He applied for a PPP loan through Summit, which he described as “critical funding at a very important time.”
“We very much needed the loan to make up for the loss in sales. Thanks to that we’ve been able to keep everyone on payroll at full pay,” he said, adding that community banks “stick their necks out for companies in [a way] big banks never would” because they have to make and maintain relationships with businesses in their communities.
Long wait times and uncertainty for some
On the other hand, some businesses have not yet had the same success in being approved to receive the loan.
Matt McCallum, the assistant manager of House of Records, recently received an email from Columbia Bank saying there was still room to apply for a PPP loan. But within an hour, he said, the bank reached 12,000 applications and stopped accepting more, and it instead offered the names of several other possible banks the business could file an application with.
House of Records laid off its staff early to protect its bank account during the uncertainty to square away money for an emergency fund, McCallum said. For that reason, it now has money to help laid off employees with expenses like rent, groceries or bills if they need it.
“I’d do anything to be able to pay them whether they come to work or not,” he said, adding that if House of Records does secure a loan, he will not require them to come to work.
“If they want to stay home, they can stay home. I just want them to not struggle.”
Edward Schiessl, the managing director of Broadway Metro theatre, said he laid off his entire staff of 20 “at least temporarily” and would like to be able to rehire them all, but “there are a lot of variables” involved — namely, when the theater will be allowed to reopen and whether there will still be restrictions in place on its capacity and “when people will feel comfortable with large gatherings regardless of when the stay-at-home order is rescinded.”
Schiessl said he applied for the PPP and Economic Injury Disaster Loan programs on the first days they became available.
“At this point, I’m not even sure if I would accept the PPP funds if they are awarded,” he said, citing the fact that, per the PPP’s rules, Broadway Metro would have to rehire its entire staff immediately during a time that it is “legally not allowed to operate.”
About 75% of the PPP funds would need to be spent paying staff that are not working, he said, but the remaining 25% for rent and utilities would only cover about two weeks of rent for the theater.
Schiessl said there is “a very real possibility” that the PPP funds will not be forgiven since there are “no clear guidelines” on the process. “I’m not excited about accumulating debt to rehire staff I don’t have work for,” he said.”That’s what unemployment insurance is for. Not sure how this is supposed to help anyone in its current form.”
In order for the loan to be forgiven, borrowers must submit a request for forgiveness to their lender, which includes documents that verify employment information and payments for mortgages, utilities and leases, according to the Treasury Department. Decisions about whether the loans will be forgiven must be made in 60 days by the lender.
During the eight week period for loan forgiveness, beginning on the day of loan disbursement, he said Broadway Metro would need to show an employee headcount and payroll expense similar to its monthly historical average to be eligible for forgiveness. But since the theater is not allowed to operate, he said, “that’s a completely unrealistic requirement.”
Schiessl later said he received a notice that his application was being processed as of April 14. He applied at Broadway Metro’s credit union, he said, but it appears to have “outsourced the process to a third party” so he is unsure who the lender will ultimately be.
Arcimoto, the Eugene-based electric vehicle manufacturer, said Tuesday in its annual report filed with the Securities and Exchange Commission that it furloughed 74 of its 95 employees and suspended production of its “fun utility vehicle.”
The company is applying for the PPP loan as well as disaster relief loans and is focusing its efforts on production.
Arcimoto declined to comment on the Emerald's story.
About a third of the staff at Tsunami Books was recently laid off, and President and General Manager Scott Landfield has applied “numerous times” for the PPP but said “the banks are slow” and most of them “don’t have it together yet.”
Although bookstores were not listed among the businesses required to close in Governor Kate Brown’s executive order, Landfield said Tsunami Books closed except for curbside pickup two days before the order for safety purposes. He said whether or not the bookstore is granted a PPP loan will be “the difference between staying open and closing.”
The potential $20,000 to $30,000 the bookstore could receive from the loan would be “huge” for a “little business,” he said.
Tsunami Books has held over 5,000 events for music and literature, and Landfield said, “that's what has driven Tsunami for all these years and that’s over right now, that's 100% gone.”
He said he had to cancel 45 events that were scheduled for April, May and June. “I had to work my butt off putting those events together — it was my best effort ever — and then cancel them in one day,” he said.