Pandemic pushes local small businesses to re-apply for federal P3 loans
One minute back in March, Amanda and Anthony Stromoski were debating whether they should permanently shut down the popular Kingston bookstore, bar and cafe they opened in November 2017 due to the pandemic.
The next minute, with strong community interest, the couple, owners of Rough Draft Bar & Books, quickly, emotionally and gratefully set up a system for ordering books and merchandise online.
The pair, both 38, piled into their dark gray Subaru Forester and attempted to fill more book and coffee bean delivery orders than they could handle within a 30-mile radius. around their store.
But now, even with the store reopened for regular business, space constraints have eliminated its ability to seat customers inside and sip coffee and liquor, a key profit driver for Rough. Draft.
So the bookstore and bar are among local businesses currently seeking forgivable loans from the federal paycheck protection program, following a Congressional reauthorization in December of the coronavirus relief effort. The program, which ended last August, was relaunched on January 11.
Interest in federal pandemic loans is strong, but down significantly from the program’s launch last April. It’s the word of various interested community members, including business owners, economic development officials and a CEO of a local community bank.
They said that among several reasons for the apparent decline in interest was a sometimes onerous federal administrative process aimed at preventing fraud. They think all the federal paperwork sometimes prevents businesses from having the money they need to stay afloat. (Currently, the US Small Business Administration has put about 240,000 loans from early P3 recipients on hold because it double-checks for errors and fraud).
Know the PPP rules
Last year, the Stromskis delayed getting a PPP loan for Rough Draft. But, with the PPP criteria changed this year, the couple thought they might better meet the criteria to seek a share of the $ 284 billion in program funding that Congress appropriated as part of its recent plan to fund. $ 900 billion coronavirus stimulus.
“Before you jump into anything and accept a big loan, just make sure you know what you will need – what you are going to pay off and what you will need for forgiveness,” Amanda advised. Stromsky. “Make sure you feel confident enough that you can follow the directions.”
Last spring, local businesses immediately inundated Orange Bank & Trust with 800 PPP applications. (Community banks and major lenders facilitate loans). This year, Orange Bank received just over 300 applications with “already considerably slower demand,” said bank CEO Michael Gilfeather.
Orange and Ulster County Economic Development Directors Bill Fioravanti and Tim Weidemann, respectively, agreed that demand for PPP loans is healthy but still falling significantly this year. Fioravanti, for example, has so far received half as many calls from companies seeking advice than last year.
More restrictive PPP criteria also appear to reduce the demand for loans. This year, people eligible for loans, including businesses, some nonprofits, self-employed workers and independent contractors, must have 300 or fewer employees, up from 500 last year. Former loan recipients can also apply for new loans.
Additionally, applicants must demonstrate a 25% reduction in gross revenue in any quarter in 2020 compared to the same quarter in 2019 – a new requirement. In addition, the PPP, which is due to close on March 31, now gives borrowers up to 24 weeks to accumulate repayable expenses instead of eight weeks.
‘The light at the end of the tunnel’
One thing that has not changed: To be eligible for the rebate, 60% of the loan money must still be spent on staff costs, the rest can be used for certain expenses like rent and utilities.
Qualifying for loans “is really a numbers game, with one big difference being that 25% reduction in income requirements,” said Randy Resnick, owner of a long list of Sullivan County businesses including Bernie’s Holiday restaurant in the town of Thompson, which is applying for a PPP loan. It is good “that they have extended the deadline to three and a half months for restaurants (and other businesses) to use the loans.”
Resnick still fears for the survival of small businesses in the region, especially restaurant, hotel and restaurant businesses like Bernie’s. Bernie’s is 30 percent of its indoor customers compared to last year.
The number of private sector jobs in the Hudson Valley in December for the recreation and hospitality sector, including restaurants, was hit the hardest. It is down 9.2% or 74,800 jobs to 741,700 from December 2019, according to state data. Year over year, the industry lost more than one in three employees (36.2 percent), falling to 57,900 from 90,800, a regional record high.
Many other small businesses are struggling as well. In total, a third expect to need some form of financial assistance or additional capital to survive over the next six months, according to a new survey from the US Census Bureau.
Local interviewees said the keys to getting a smooth PPP loan this year include careful bookkeeping to show lost income; patience and perseverance wading through a quagmire of federal red tape; a close relationship with a bank that works directly with clients instead of using a bank that subcontracts with a supplier to execute PPP loans; and careful planning to ensure businesses meet loan cancellation criteria.
“Hang in there,” Ulster County official Weidemann advised companies. “There is a light at the end of the tunnel. We are at full speed in the distribution of vaccines. “