MI small businesses waiting on forgivable loans to pay workers
Few Michigan small businesses have yet received any money from new federal loan programs intended to help entrepreneurs weather the coronavirus pandemic.
“Some of these applications are making it through and (businesses) are getting confirmation now,” said Janelle Best, President of the Howell area Chamber of Commerce. “And I think that there is just a lot of confusion around, you know, what can I apply for?”
There is a vast and complicated array of programs and funding available to help small businesses suffering because of the coronavirus pandemic. One federal program offers forgivable loans for employers who keep their current workers on the payroll.
The Payroll Protection Program (PPP) is a forgivable loan if all employees are kept on payroll for eight weeks. PPP loans are capped at 250% of a business’s average monthly payroll.
“It’s an unprecedented offering by the federal government,” said Brian Calley, President of the Small Business Association of Michigan and a former Republican Lieutenant Governor of Michigan. “The system is being built as its being implemented. It’s causing a lot of people a lot of stress and pressure.”
Calley says he’s encouraging almost any businesses who ask to apply either PPP or other programs available. He says businesses and lenders should be prepared to be frustrated, and to stay persistent.
There were fears PPP funding could be exhausted before many businesses had a chance to apply. Now Congress is negotiating on a possible deal that could provide the PPP more funding.
“Everyone’s scrambling (to apply for) the Payroll Protection Program,” says Alaina Campbell, President of the Rochester Regional Chamber of commerce.
Campbell owns an ice cream shop in Lake Orion; a shop she’s choosing not to open during the coronavirus pandemic even though she could serve customers through the take-out window. Instead she’s rehired nine employees from last year, put them on the payroll, and is working to set-up ice cream delivery service for the first time. She’s hoping to get a PPP loan, and has applied for other programs too.
“We are just pivoting, you know. We have to look at our whole model different” Campbell said. “My belief is that there are so many people who are now ordering food online who never did that before, and even after this is over a large percentage of them will continue to do that because… it’s convenient.”
Both Campbell and Best say they aren’t aware of any member businesses in their organizations that have yet received approval from local lenders or the Small Business Administration (SBA).
“I have not heard of anybody who has actually received funds from any of the programs at this time,” Best said. “I have heard that some individuals have received confirmation that their application has been received and it’s being processed.”
Earlier this week Vice President Mike Pence said the SBA had “disbursed” over $71 billion of the $350 billion in funding allotted for the PPP, though Calley says many of the bigger lenders across the country were still working to get PPP application processes online.
“That’s not an insignificant amount, but it’s a slower uptick than I was expecting,” Calley said.
Michigan Democratic Congresswoman Elissa Slotkin said she knows of one small business in her district that’s received funds through an SBA loan.
“That was actually my first data point of an organization actually seeing money,” Slotkin said. “So that, I think means we’re at the beginning of the (money) trickling in.”
Calley said some members of the Small Business Association of Michigan have scheduled closings on PPP loans, and could see money in their bank accounts within a week.
“The hope (is) when it’s safe to start operating again the economy can start up very quickly and we won’t have lost as much as we would lose if employers’ workforces were kind of scattered to the wind,” Calley said. “Unfortunately though the longer the stay home order lasts, the less likely it is that those teams can kind of snap back.”
Martin Smith, Senior Lender at First National Bank of Howell, says many clients have submitted PPP applications but they had no scheduled closings as of Wednesday. He says a program like the PPP hasn’t been tried before, so it’s hard to know how much it will help businesses.
“As long as the SBA and Treasury Department at large are willing to offer additional loans to those companies that merit additional credit, we economically, as a state and country will slowly rebound over the next couple years,” Smith said.