The Secret Struggles Facing Small Businesses Desperate for PPP Loans

After dinner one April night, just as I was prying the remnants of veggie stir-fry from a skillet at my kitchen sink in rural Iowa, my cell phone lit up. I didn’t recognize the number, but I was already past the point of suspecting telemarketers. I grabbed my Airpods off the charger and settled in at my laptop: “Hi! This is Kristine with SBDC. How can I help?”

Since the $2 trillion federal Coronavirus Aid, Relief, and Economic Security (CARES) Act funding began trickling down to small businesses this spring, I’ve been performing phone triage for America’s Small Business Development Centers (SBDC), a federal program administered at the state level. My district serves Northeast Iowa, and I’m one of several employees who answer a hotline for business owners each weekday. On paper, I’m a “business development counselor,” but the coronavirus pandemic has transformed my role.

Taking a fast pulse on a caller’s business type and cash position, I’m now a frontline advisor on how to apply for local, state, and national support for surviving COVID closures, including the Small Business Administration’s Economic Impact Disaster Loan and Paycheck Protection Program. In many cases, I’m the first live human to provide direct assistance.

“I can’t thank you enough!” I hear again and again, often with the caller trailing off just as their voice cracks. “I’ve been on the phone and looking for answers all day, and you’re the first person to help me.”

To be clear, I’m not a faith healer. I’m just a business owner paying what I can forward, as I myself take in the unprecedented scale and scope of both the economic need and the aid provided. Here’s a quick scan of COVID-induced symptoms, so far, in the small-business community:

Finance 101

State-mandated shuttering of all but essential businesses caught many small companies, especially seasonal cash businesses, without a strong grasp of their finances or modern mechanisms to bring their bookkeeping up to speed.

Accurate accounting and timely tax preparation proved crucial to the application for state and federal relief money—the Paycheck Protection Program calculates loan amounts almost exclusively from past tax filings, for example. Those businesses who’ve operated for years—lifetimes, in some cases—without once generating a balance sheet have struggled both to see their business as lenders do and formally apply for loans and grants.

Small business owners need Congress to take action and pass tax reform.

Small business owners need Congress to take action and pass tax reform. U.S. Air Force photo/Janet Taylor-Birkey

Martyr Mentality

There’s something about Midwesterners—and I’m born and bred—that prevents us from accepting help gracefully. “I just feel bad asking for that grant,” a friend and uber-qualified small-business owner told me. “So many people need help more than I do.”

In the same conversation, my friend—like dozens I spoke with through the hotline—planned to dip into personal finances to cover business losses. Others are cashing in retirement savings or maxing out credit cards, all in the name of avoiding “debt” like a four-letter word.

Many big businesses, as we’ve discovered, had no such qualms about preventing other people who needed more help from getting it.

SEE ALSO: How Americans Are Making Money at Home During the Pandemic

The Window for Re-Opening is Warped

The massive CARES initiatives rolled out so quickly that they only loosely fit many small business types. Some Paycheck Protection Program recipients, like salons and gyms, found themselves scrambling to use funding for its intended purpose—paying their full workforce—while they were mandated to stay closed.

Other seasonal businesses, like swimming pools and roadside attractions, were forced to pull their average payroll data from their off-season numbers (January through April), resulting in next to nothing in payroll support for summertime operations, when they eventually re-open.

No Money is “Free”

In its second round of funding, the SBA’s Paycheck Protection Program opened to sole proprietors, independent contractors, and other self-employed types, and many of them, thankfully, received funding. A key component of this loan program is that funds are forgivable if spent on specific eligible expenses, starting with payroll (75 percent of their loan amount).

Sole proprietors may struggle to meet the terms for full forgiveness, however, when beyond their average payroll, they may only count those business-level rents, utilities, and interest on mortgages that appear on the same Schedule C they used to draft their PPP application.

If loans cannot be fully forgiven, these folks will need to decide whether to pay back the portion unused, or, if the money is long spent, refinance it as a lending tool to survive COVID long-term. At one percent for two years, PPP money is not free, but it’s close—and it may be the first step toward lending and leverage that many business owners have needed but have been too proud, stubborn, or unaware to use before.

The Real Dirt

Toward the end of many calls, I’m asked about unemployment. In rural areas, it’s often the case that furloughed employees are taking home more on unemployment with the addition of the $600-a-week federal support than they would in their working positions. This makes it hard for employers to hire folks back to meet the forgiveness guidelines of PPP funding.

Employers are also tasked with reporting employees who refuse re-hiring to state unemployment agencies, a trigger that cuts off benefits (at least in Iowa — this might vary by state). Week by week, callers say, it’s painful to know businesses are having to make tough calls, against friends, against neighbors, and sometimes against family.

Still, light shines. The success of our hotline, in my experience, has been to ensure callers simply feel heard. It’s always good for our communities and our collective mental health just to pick up the phone. And on my end, I listen for just one actionable step—one form to fill out, or one business pivot to explore to re-open the doors. Somehow, more often than not, we find a way to laugh. To dream about the first frivolous thing we’ll do when Main Street welcomes us all back. It’s one foot, as they say, then the other.

The Secret Struggles Facing Small Businesses Desperate for PPP Loans