Michigan small businesses rocked by coronavirus turn to Congress for help
Congressional leaders said they are exploring a $250 billion expansion of the PPP program, which offers forgivable loans if the money is used for payroll and an interest rate of 1 percent on the rest.
by Paula Gardner (Bridge)
The lights are off at Sun and Snow Sports in Plymouth. So is the heat. Orders for summer inventory are canceled.
But none of that changes the math for co-owner Rob Parent.
With $25,000 per month owed in rent and no sales since Michigan’s March 24 stay-home order, the swim and ski retailer can’t pay its bills.
“The really difficult things are the fixed costs,” said Parent, who also operates a store in Ann Arbor and a warehouse. “You can’t scale that back, and we have zero revenue coming in right now.”
Parent is among the thousands of Michigan business owners who hoped two federal stimulus loan programs would help bridge the time between their temporary shutdown and a return to generating revenue.
Instead, the programs ran out of money. Now business leaders and small business owners like Parent are turning to Congress, asking for more funding for both the $349 billion Paycheck Protection Program (PPP) and the $380 billion Economic Injury Disaster Loan (EIDL) program. The federal efforts were announced after the coronavirus prompted closures of non-essential businesses nationwide. However, by April 16, PPP was depleted, and applications were halted for the loan program.
Restoring the Paycheck Protection Program is now a priority for dozens of groups that represent small businesses in Michigan. In all, Michigan had 873,722 small businesses in 2019 that employed 1.9 million, according to data from the federal government.
“This matter cannot wait,” according to a letter sent April 16 to Michigan’s congressional delegation from the Michigan Chamber of Commerce and 33 other state business associations.
“We urge swift congressional action,” the letter continues, “including program enhancements and additional funding so the business community and financial institutions can continue to distribute these desperately needed dollars to small businesses, which form the economic core of our communities. “
Congressional leaders said they are exploring a $250 billion expansion of the PPP program, which offers forgivable loans if the money is used for payroll and an interest rate of 1 percent on the rest. Employers with fewer than 500 employers were eligible.
Congress will be back in session on May 4, prompting the requests for immediate help. However, bipartisan negotiations will take place this weekend.
U.S. Sen. Debbie Stabenow, D-Michigan, said during a televised town hall on April 16 that adding new funding to the program is a priority.
“I’m confident that we will be able to get that done,” she said. “We want to make sure everyone in Michigan is being supported with this.”
Emergency federal stimulus funding seemed like a lifeline for the nation’s struggling small businesses when it launched April 3. According to the Small Business Administration, 1.66 million applications for PPP were approved, and a total of $349 billion in loans have been made by 4,975 lending institutions.
In Michigan, over 25,000 loans were approved with at least $8.5 billion in approved dollars, according to the Michigan Chamber.
Interest in the program was immediate among University Bank customers, said Stephen Lange Ranzini, president of the Ann Arbor-based bank. Loan officers there wrote $9.2 million in applications, Ranzini said, with $7.75 million approved. Another $1.4 million were in process when the funding ran dry.
Fourteen businesses had been approved by the bank, but couldn’t get into the SBA system in time to get funding, Ranzini said.
“Our staff literally were trying to log into [the system] around the clock including at 3 a.m. and 4 a.m. in the middle of the night to see if we could get through the SBA’s overloaded system when demand was lower, and still had a tough time doing so,” Ranzini said.
That situation played out at other banks in Michigan as customers hoped their applications would lead to funding. Among the University Bank customers seeking help: restaurants, a fitness center and high-tech research and development.
Meegan Holland, spokesperson of the Michigan Retailers Association, said the situation is frustrating for retailers, many of whom face paying both fixed costs and covering bills for inventory, ordered to fill stores considered non-essential under the stay-at-home order.
One store owner, Holland said, told her she is using a credit card “to pay for inventory that she ordered for spring/summer and can’t sell to pay the bills.”
Parent said he and Heidi Parent, his wife and Sun and Snow co-owner, now qualify for unemployment under broadened guidelines that allow self-employed people to apply. That, he said, will help.
The couple is preparing for an 18-month shutdown, and hoping that’s not the case. So far, their summer swim business is looking questionable as clubs cancel their competitive seasons. Looking ahead to winter sports makes him more optimistic, but that means several months during which regular customers won’t need skis or boots.
Getting stimulus funds remains a hope, he said. Learning that his application through Northstar Bank didn’t make it through the system, Parent said, “rocked me pretty hard.”
He continued: “It brought us peace of mind, knowing we were doing the steps necessary. We were told to sit and wait. So we did.”
As a seasonal business, Sun and Snow employs 15 to 25 people. So far, all qualify for unemployment, Parent said. But if federal emergency funding reaches him, he’ll hire a few back to work on the store’s website. And he’ll pay the rent.
“I just hope they can come up with a solution soon enough,” he said.
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