COVID-19

Eight weeks in, businesses face hard choices over PPP loans

Justin Ho May 22, 2020
Heard on: Marketplace
HTML EMBED:
COPY
A bar in New York sells cocktails to go in March. Small businesses are still struggling eight weeks after the CARES Act became law. Victor J. Blue/Getty Images
COVID-19

Eight weeks in, businesses face hard choices over PPP loans

Justin Ho May 22, 2020
A bar in New York sells cocktails to go in March. Small businesses are still struggling eight weeks after the CARES Act became law. Victor J. Blue/Getty Images
HTML EMBED:
COPY

Eight weeks ago today, the Coronavirus Aid, Relief and Economic Security Act became law. We checked back in with some of the small businesses and banks we spoke to on that first day to find out what the law has and hasn’t done for them.

It took a full week after the CARES Act became law for the small business loan provision, called the Paycheck Protection Program, to get up and running. By the end of that day, Ashwin Deshmukh said he was finally making some progress on securing a loan for his New York City cocktail bar.

“I feel like we’ll be able to get at least a loan — if not today, than by the middle of next week,” he’d said. It took over a month.

But by this week, Deshmukh said he’s optimistic. He’s shooting to reopen the bar for carryout service and delivery a week from today. And he’s using the loan money to hire a new chef, work on an all-new cocktail menu and start selling baked goods.

“These are things that we would not focus on if the world was different right now,” Deshmukh said.

Like a lot of business owners who got PPP loans, Deshmukh is struggling with how to meet the requirements to have the loan forgiven. Businesses have to spend 75% of it on payroll within eight weeks.

That’s a problem for Ken Giddon, who co-owns a menswear store in New York.

“Our eight-week period would be eight weeks that we are closed,” Giddon said. “Then it’s basically virtually impossible to fulfill the payroll obligations to get the loan forgiveness.”

And he said having to spend most of the loan money on payroll means he can’t spend it on what he calls his biggest problem — rent.

“Payroll is flexible. Rent is not. And rent can put small businesses out of business,” he said.

Some small businesses aren’t worrying about getting their loan forgiven.

Lorilyn Wilson co-owns an accounting firm in Portland, Oregon. She took out a PPP loan and said she’d rather keep cash on hand and pay off the loan later.

“Because it’s like I don’t want all my employees employed today, I also want them employed three months, six months, nine months, a year from now,” Wilson said. 

But there’s a risk that small businesses may not be able to pay back their loans if the virus spikes again later this year, Wilson said.

“Then the fear is ‘OK, can I actually keep my business going, or will I be forced to shut down in six months again?'” she said.

She added that small business owners are worried they’ll get caught up in a cycle of having to rehire people and then lay them off again.

COVID-19 Economy FAQs

Pfizer said early data show its coronavirus vaccine is effective. So what’s next?

In the last few months, Pfizer and its partner BioNTech have shared other details of the process including trial blueprints, the breakdown of the subjects and ethnicities and whether they’re taking money from the government. They’re being especially transparent in order to try to temper public skepticism about this vaccine process. The next big test, said Jennifer Miller at the Yale School of Medicine, comes when drug companies release their data, “so that other scientists who the public trust can go in, replicate findings, and communicate them to the public. And hopefully build appropriate trust in a vaccine.”

How is President-elect Joe Biden planning to address the COVID-19 pandemic and the economic turmoil it’s created?

On Nov. 9, President-Elect Joe Biden announced three co-chairs of his new COVID-19 task force. But what kind of effect might this task force have during this transition time, before Biden takes office? “The transition team can do a lot to amplify and reinforce the messages of scientists and public health experts,” said Dr. Kelly Moore, associate director for the Immunization Action Coalition. Moore said Biden’s COVID task force can also “start talking to state leaders and other experts about exactly what they need to equip them to roll out the vaccines effectively.”

What does slower retail sales growth in October mean for the economy?

It is a truism that we repeat time and again at Marketplace: As goes the U.S. consumer, so goes the U.S. economy. And recently, we’ve been seeing plenty of signs of weakness in the consumer economy. Retail sales were up three-tenths of a percent in October, but the gain was weaker than expected and much weaker than September’s. John Leer, an economist at Morning Consult, said a lack of new fiscal stimulus from Congress is dampening consumers’ appetite to spend. So is the pandemic.

Read More

Collapse

As a nonprofit news organization, our future depends on listeners like you who believe in the power of public service journalism.

Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.

Donate today — in any amount — to become a Marketplace Investor. Now more than ever, your commitment makes a difference.