Small businesses across Arkansas have been doing everything they can to stay afloat during the coronavirus pandemic. But some have found themselves at a crossroads when it comes to available federal resources, notably loans through the federal Paycheck Protection Program (PPP) and the additional weekly $600 in unemployment benefits — both of which are detailed in the $2 trillion federal coronavirus stimulus package, the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Under the program, affected small businesses and nonprofits with fewer than 500 employees that were operating by Feb. 15 are eligible to apply for the funds. Originally, $349 billion was allotted for the small business loans, and those funds ran out on April 16. On April 24, President Trump signed into law an additional relief bill that included another $310 billion for the PPP.
PPP loans can be for two and a half times payroll costs up to $10 million. Of the received funds, 75 percent must be used for payroll while the remaining 25 percent can be used for non-payroll expenses such as rent, mortgage interest or utilities.
The loans can be forgiven if borrowers use their loan for permitted expenses within eight weeks of the deposit of the loan. For the parts of the loan not eligible for forgiveness, interest is fixed at 1 percent, the loan is due in two years and payments are deferred for six months with interest accruing through the deferral period. The PPP is expected to run until June 30.
According to the Small Business Association’s Paycheck Protection Program (PPP) Report, 4.4 million loans had been approved with a total of more than $511 billion as of May 23.
Arkansas was reported to have received 40,329 loans at a total of $3,286,789,662. A U.S. Census Bureau survey released May 14 reported that nearly two-thirds of small businesses in Arkansas had received loans, making the state among the highest in the nation.
Another important aspect of the CARES Act is the additional weekly $600 in unemployment benefits on top of regular benefits until July 31, 2020. With millions filing for unemployment, the national unemployment rate is currently at 14.7 percent. Arkansas’ rate is at 10.2 percent. According to an analysis by The New York Times, the number of people receiving unemployment in all but 13 states is making more than their previous salaries on average, with Arkansans making over 120 percent of what would be comparable to their normal salaries.
A common discussion among Arkansas’ small business owners: “Why would I pay my people for eight weeks when unemployment pays more?”
Wendy Ramsey, the owner of The Crown Shop in Little Rock, received her $129,000 PPP loan on April 20, about a month after temporarily closing her Park Plaza Mall store on March 17.
“We immediately told all of our employees to go ahead and file for unemployment. At that time, we didn’t know anything about an SBA PPP loan,” Ramsey said. “We learned about [PPP] probably about a week or two after we closed.”
The eight full-time employees and 25 part-time employees were making $10 to $17 an hour, which amounts to somewhere between 50 percent and 70 percent of what they’re making from current unemployment benefits — about $1,000 a week.
“We probably would’ve likely still paid them to be off had we known about the loan before we told everybody to file for unemployment,” Ramsey said.
Ramsey said she had a friend who worked in banking who was able to help them understand the confusing parts of the loan, so she was able to fill out the application in late March or early April. However, having been closed for weeks already, Ramsey lost time on spending the required amount of money to qualify for loan forgiveness.
“We opened on May 4, but we’re not going to meet the 75 percent because that’s the qualification — you have to spend at least 75 percent of it on payroll to get it forgiven. And at this point, we don’t see that we’re going to do that,” Ramsey said. “Most of our employees filed for unemployment. They’re getting the $600 a week and not making that much at our stores. So, they’re not wanting to come back full time, because they’re not wanting to lose that $600 per week.”
Ramsey said her two stores, their employees and customers, have always been like a big family. During the six to eight weeks The Crown Shop was closed, a handful of already-furloughed employees volunteered to come in and help with curbside pickup without expecting pay.
“It’s like a family. We have such loyal employees; I don’t know how we would do it without them,” Ramsey said.
Though the loan is expected to help lessen part of the economic burden on The Crown Shop, Ramsey said that without the time restraint and specific spending requirements, the loan might have been much more helpful.
“It’s almost kind of like a smoke-and-mirrors thing because the government says they want to support the small businesses, but they’re also paying our employees $600 a week,” Ramsey said. “To me, the purpose should have been for us to hang on to it to get some of our working capital so we can get our business back up and running over these next crucial months and probably the remainder of the year. I feel like we’re going to be facing this for a long time.”