EVANSVILLE — As the second wave of stimulus aid is set to roll out, small business owners are skeptical if this time around will be any better.
On Friday, President Trump signed a $484 stimulus package that includes measures to replenish the depleted Paycheck Protection Program with an added $320 billion.
The PPP loans were originally a part of the Cares Act, aimed at helping small businesses that have experienced immense economic hardships as a result of the COVID-19 pandemic.
Under the program, small businesses — defined as having 500 or fewer employees —could receive loans to cover eight weeks of expenses, up to $10 million. The money can be used to cover payroll costs, mortgages, rent and utilities.
The loans carry low-interest rates and can be forgiven in some instances.
Jason Gerteisen is the owner of the local consulting firm, Healthy Future Group LLC, operating since 2010.
A ripple effect began happening when the stay-at-home order was first announced, and the companies he was contracted to do projects for had to close their doors and in turn, canceled their projects with Healthy Group.
By mid-April, it got to the point that his company only had one contract sustaining them, so he applied for a PPP loan. A week later, he received a letter stating his application had been received but there was no more money left to give out.
The $349 billion originally allotted to the PPP loans ran out by April 16, only lasting 13 days. Many small business owners were frustrated; they needed that money to keep operating.
Adding to that frustration were reports that big corporations received millions of dollars out of the fund meant for small businesses.
An investigation by AP found that at least 75 companies that received a combination of $300 million from the PPP program had market values well over $100 million. A quarter of those companies were struggling prior to the economic consequences caused by the pandemic.
“It’s disheartening. Big businesses have been getting millions upon millions of dollars through these programs. But small businesses, I know several here in Indiana that are on the verge of closing down their businesses or have closed completely," Gerteisen said. "I’m really disappointed with how they've handled it."
Small businesses are the backbone of local economies but without major government assistance, many will not survive this crisis.
Gerteisen said he can't go another month without assistance but is determined to find another alternative.
"It’s been stressful. I have a family, and we’ve been juggling home life on top of how to stay in business and how to pay the bills," Gerteisen said.
"It’s been hard, but we’re people of faith. We do a lot of praying, and God always seems to respond and will keep us going. And we’ll continue one way or another."
The second round of stimulus aid vows to fix the problem of big companies taking money meant for small businesses. New guidelines set out by the Small Business Administration states companies applying for these funds must guarantee the loans are necessary, and they can't turn to other sources for funding.
Big corporations that took millions of dollars in aid out of this fund are being asked to return it.
Gerteisen said he hopes this time around, the funds will go where intended because this money "could make the difference between night and day for small businesses."
He said if the government wants businesses to remain closed to help flatten the curve, they need to help replace lost income because not having any money coming in is having devastating effects for many people.
'Can I stay open?'
Heather Vaught, owner of Main Street coffee and gift shop River City, said self-employed people have been hit hard, and there's not a lot of resources available to them.
Vaught also applied for a PPP loan in early April, but funding ran out. To this day, she hasn't received any government support even though she's been out of work for six weeks.
She said she disagrees that businesses with 500 employees should be considered "small," and it's leading to local companies with small staffs being overlooked when it comes to getting aide.
River City closed for a little over a month beginning in mid-March. Before closing down they attempted to operate through pick up only orders, but their sales dropped by 75% and kept dropping.
While some businesses have had some luck changing their operating model, it doesn't translate well into every industry.
In River City's case, a coffee shop that also sells handmade goods, they don't carry anything essential. With so many unemployed, the demand for these goods isn't there as people are reluctant to splurge right now. Being a downtown business, they also relied on foot traffic but with the stay at home order, that greatly decreased.
Vaught had to toggle with the question many small business owners are asking themselves — can I stay open?
Vaught doubted how viable it could be for her to change her business model. If she hired people to do just curbside coffee orders, there might not be enough sales to cover overhead expenses and pay her staff.
If she invested money and other resources in creating an online platform to sell the gift-items, that would be more money down the drain if enough people don't purchase them.
River City has limited pick-up and delivery options still available.
PPP loans only go so far
The way the loans are intended to be used doesn't do much to solve those issues, and Vaught's situation isn't unique — many small business owners have similar worries.
"I worry about Evansville because it’s only been the last 3 to 5 years we’ve really seen a lot of new small businesses, and there’s just going to be businesses that aren’t going to reopen after this, and that’s the sad reality," Vaught said.
For those hoping to not have to pay back these loans, per SBA guidelines, only 25% of non-payroll expenses will be forgiven. Businesses wanting the entire loan forgiven will have to keep the same number of employees they had before the crisis happened.
But as many non-essential businesses are seeing drastic reductions in their sales, that's simply not possible.
"I think their intention was good, but I can’t have 10 people working if we don’t have 10 people’s worth of business to give them. It doesn’t make sense," Vaught said.
"Even if we got the loan, if I don’t get forgiven for it, then I’m just putting myself thousands more in debt."
PPP loans can not be used to pay past wages or expenses and are intended to cover costs within an 8 week period starting as soon as the business receives the money according to SBA guidelines.
Businesses that are currently closed because they don't want to operate amid the pandemic, but want to use that money for when they re-open in the future are not allowed to do so
"Navigating all this has been very confusing and uncertain. You try to stay positive but there's not a lot to look positively on. A lot of people don’t know what to do and don’t have a lot of options," Vaught said.
She'll try to adjust her business to keep operating but hopes government aide would take into account the unique challenges small businesses face and work to address them.
She said what's been helping her and other local business owners get through this time has been the community's support.
"There’s been amazing customers who’ve tried to buy gift cards and buy merchandise to be supportive, and we love all those people. The community has been amazing and trying to support us," Vaught said.
Concerns are already being raised if this second round of funding will be enough. PNC Bank posted a message to their small business customers stating "unfortunately, with the significant volume of applications already submitted to PNC and other lenders, it is quite possible that not every qualified applicant will receive loan proceeds under the PPP – even with the authorized additional funding."