As the co-owner of A&A Fire and Safety Company in Cabot, April Broderick has overseen the inspection, maintenance and installation of fire suppression systems and fire extinguishers for numerous clients across Arkansas, from a wide array of restaurants to the Little Rock Air Force Base and its dormitories.
When the COVID-19 pandemic hit last year, shutting down or severely limiting the capacities of restaurants statewide, she faced the harsh reality of being among the countless companies that were tangentially affected.
The economic hardships made many businesses unable to afford the maintenance services that A&A provided. But thanks to the Payroll Protection Program (PPP) of the U.S. Small Business Administration (SBA), help in weathering the economic storms was readily available.
Broderick said the PPP loans were the most helpful funding mechanism during the pandemic.
“Those helped tremendously,” said Broderick, who maintains a staff of 12 employees. “The PPP loans allowed A&A to keep folks employed, although our commercial revenues dropped dramatically. The loan process was simple, along with the loan forgiveness process, and my first PPP loan has already been forgiven.”
Broderick is just one example of the far-ranging impact that the PPP had on businesses in Arkansas, as the final SBA tallies reveal that 42,928 in-state businesses have received more than $3.3 billion in loans from the program — saving more than 375,000 jobs. And as she noted, it was easy to receive the loans since PPP has a 78 percent loan-approval rate, and forgiveness comes easily as well since any company that used at least 60 percent of the loan on payroll costs is fully forgiven.
Aside from a myriad of payroll issues that the PPP covers, funds can also be used to cover such expenses as rent, mortgage interest, utilities and operations expenditures. And according to Arkansas SBA Director Edward Haddock, there has been some recent good news to add to those early successes.
“You’ll see national reports point to small businesses only having two to three months of cash on hand at any time, and those would be what we consider pretty strong small businesses,” Haddock said. “Luckily, Congress and the federal government have been able to step in and support that with sufficient relief funding, not only through the PPP and the CARES Act, but through the economic aid act that was just recently passed in December.
“That authorized a second round of PPP, reauthorized PPP and created a second draw-round of loans as well as many more opportunities for existing businesses to obtain financial support to make it through the crisis.”
The other primary form of COVID-related loan support provided by the SBA is the Economic Injury Disaster Loan (EIDL) program, through which more than 21,000 Arkansas businesses have received more than $1 billion in pandemic relief funds, with an average loan of $49,373. These loans, which are available at a maximum of $150,000, cover working capital and normal operating expenses including payroll, with the only restriction being that they cannot be used for new equipment. They are currently available throughout 2021.
The EIDL is a 30-year loan in which the first payment is deferred for 12 months, and has a 3.75 percent interest rate for businesses and 2.75 percent for nonprofits. The biggest difference from the PPP is that these are not forgivable. Information on it and PPP loans is available at SBA.gov.
Unfortunately, Haddock notes that such public funding mechanisms are not available for startup businesses, even amid the pandemic.
“The startup space hasn’t had that type of funding-relief mechanism because these are businesses that are not yet created,” he said. “Those businesses are now looking to alternative financing sources. Traditionally, startup businesses are using their own capital in order to begin or for those high-growth-oriented businesses, or they’re looking to angel investment and outside investors to start.
“There has been obvious concern and drawback about investments with the future uncertainty that COVID has provided. A lot of businesses have had to rethink the startup space and make sure that their ideas and forecasts were really executable in a virtual environment and with the pandemic having an uncertain end.”
Haddock noted that the COVID crisis has forced businesses to realize that they will now always have to consider contingencies such as widespread health crises in the future. Every business will need to have a “disaster planning component” moving forward.
COVID also has accelerated many small businesses’ moves to automation and virtualization of their workforces and digitalization of their processes. Yet Haddock believes that traditional workplace interaction will rebound noticeably once the crisis eventually passes.
“Ultimately, from my experience, employees and employers want to gather as a team, and we won’t be able to virtually replace that,” he says. “We will have some permanency of remote work, but not at the level it has been during this pandemic.”
Perhaps the biggest hope for brick-and-mortar retail and restaurants is the likelihood that there will be a pent-up demand for social interaction unleashed once COVID eventually passes. Thus, Haddock believes a key component for traditional businesses staying open will involve migrating into “an experience-based product” to counteract the ever-growing shift toward online shopping.
That means that for much of Main Street Arkansas and the United States, shopping districts will be adapted to serve as local gathering spaces. After all, he said, restaurants can never be virtualized, since “I can’t eat a virtual steak with the same satisfaction I can eat a real steak.”
Haddock is optimistic that moving forward, small businesses and startups will have plenty of opportunity to redefine their futures and what entrepreneurship will look like going forward.
“When we have an economic disruption like this, it’s unfortunate but businesses do close,” he said. “But that human capital, that’s available and out there for another individual to step up and really give it their shot at the American dream. This is going to provide an opportunity for those who have the innovation to embrace change and create something new, bold and meaningful.”