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WEB EXCLUSIVE When the Paycheck Protection Program (PPP) launched with an initial allotment of $349 billion on April 3, local business owners were hopeful they’d be able to get some economic relief.
But the funds ran out in just two weeks and many small businesses in Raleigh that applied for PPP loans haven’t seen a dime.
“Our business evaporated the day the stay at home order came in place,” says Andrew Ullom, the owner of Union Special Bread in Gateway Plaza. “We are lucky we make bread. Our navigation through the PPP process has been not un-stressful but maybe easier [for us] because we have the discretion of coming to work.”
Congress is expected to pass a bill today that will allocate more funding for a small business loan program and local business owners say they are hopeful their applications for relief will be accepted on the second round.
Still, many were dismayed to learn that large restaurant chains, including Shake Shack (189 locations, 8,000 employees, $595 million in revenue last year), Ruth’s Chris Steakhouse (150 locations, 5,7400 employees, $468 million in revenue last year) and Potbelly Sandwich Shop (400+ locations, $409 million in revenue last year) received millions in PPP loans.
A provision in the PPP rules—lobbied for by the National Restaurant Association—made an exception for restaurants and hotels to apply, regardless of their number of employees; Shake Shack announced it was returning the loan after the company found another source of funding.
Bonnie Hancock, a professor and executive director of the Enterprise Risk Management Initiative in NC State’s Poole College of Management, says there are a number of reasons as to why the PPP, handled by the U.S. Small Business Administration (SBA), may seem as though it’s granting loans without any particular rhyme or reason.
“You’re basically talking about the volume of loan requests coming into the SBA being a 44,000-percent increase over what they normally process,” Hancock explains. “It’s a new program and [currently there are] loose rules. It’s easy to be critical but the government was trying to help out businesses before they go under. So lawmakers erred on the side of making requirements looser than they would have if they had thought through how to make it more targeted. They were focused on the speed of getting the funds out there.”
For some local small businesses, which bank they used to handle their PPP loan application also seemed to make a difference.
Emily Sexton, owner of the downtown Raleigh boutique The Flourish Market, says she has banked with Wells Fargo for 16 years. She says she never took out a loan or a line of credit, has an excellent credit score and pays for everything related to her businesses with cash. Sexton says she submitted her PPP application through the bank “within minutes of it going live.”
“I got one email back from [Wells Fargo] and then the same email every couple of days consistently saying to apply to somewhere else, they don’t know if they will be able to get to everyone, they are focused on businesses with less than 50 employees and nonprofits,” Sexton says. “I don’t know a single person or nonprofit that has been approved by Wells Fargo.”
Sexton’s friend, Sepi Saidi, the founder of Raleigh-based SEPI Engineering, sits on the board of directors of Dogwood State Bank, a community bank with four locations in North Carolina including one in Raleigh. She suggested Sexton try applying through them.
“I got in touch and the banker literally emailed me at 11 p.m. on a Friday night a week and a half ago,” Sexton says. “Then they told me my PPP application was approved on the Monday morning. So, I will spend the rest of my life saying ‘go local.’ I wish I had learned that earlier but, thankfully, I was very lucky this local bank took me under their wings and helped me out.”
Hancock says she, too, has heard that PPP loan applications submitted by smaller banks seem to be getting approved more quickly than those submitted through the larger banks.
“It looks like, as loans are getting granted, the banks in the best position are ones that already know the SBA rules,” Hancock says. “The community banks, ones that really focus on small business loans and have a well-oiled process to move them through to the SBA may have an edge. They already focus on small businesses and they know how the SBA works.”
The good news is, once the loans are approved, businesses who receive them are funded quickly. Ullom, the owner of Union Special, says he is hopeful his business will receive funding in the second round.
“We have been assured our application still stands, so we don’t have to go through the process again,” Ullom says. “We knew this could be an opportunity for us. We’re not holding our breath but, luckily, the PPP loan will not make or break us. Certainly, it would make getting through this a lot easier.”
Another lucky thing for Raleigh businesses?
This week, Raleigh’s city council approved a $1 million fund for small businesses to apply for economic relief. Businesses with 49 employees or fewer that have seen a 25 percent or more reduction in revenue due to COVID-19 can apply for up to $10,000 in relief.
The Carolina Small Business Development Fund will receive $850,000 to administer loans and Wake Tech will receive the rest of the money to administer to to businesses with fewer than 14 employees. Additionally, the mayor and council members are encouraging private sector donors to match the funding.
It’s possible, too, that if the coronavirus shutdown drags on, Congress could fund even more rounds of PPP loans.
“It’s a very fluid situation,” says Hancock. “It depends on, one, how much demand is not met and then on how much longer the current situation goes on. But I do think at some point [lawmakers] will tighten the loan requirements.”
In the meantime, support local small businesses to help them stay afloat; many of them are depending on it.
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