Jessi Heiner and Autumn Rosemond consider themselves fortunate.
Heiner, who owns FLYE After School, which offers enrichment activities to students at Wainwright Elementary School, and Rosemond, who owns Houston Dance Works in Oak Forest, applied for the U.S. government’s Paycheck Protection Program (PPP), which authorized up to $349 billion in forgivable loans to small businesses. Both received their money this week.
“I feel like it was all luck,” Heiner said.
On the flip side of the coin is Sean Carroll, who owns restaurant Melange Creperie in the Heights. His application was accepted by the bank and passed along to the Small Business Administration. Then came the news that the PPP fund had run dry and Carroll learned he was one of the successful applicants who was left empty-handed. The news about restaurants that got money – $10 million for Shake Shack, which has since announced its decision to return it, and $20 million for Ruth’s Chris Steak House – was a particularly bitter bill for Carroll to swallow.
“The problem with Shake Shack even though they returned it, is that the money is not available for other businesses,” Carroll said. “Just like any return.”
Carroll said he will keep his restaurant open for as long as he can.
“My priority is to pay people, (and) local vendors,” he said. “We started out as a street stand in Montrose, so we’re good at knowing how to do things on the cheap.”
Angel Smith, who has owned the Heights game store GeekLife for the last five years, said she applied for both the EIDLs (Economic Injury Disaster Loans) through the SBA and a PPP loan though her bank. Her application was not processed by her bank before the PPP fund ran out of money. She hasn’t heard anything about the EIDL, either.
While she said $20,000-$30,000 would have been a lifeline to her, it is small change compared to some of the other “small” businesses that were eligible to receive money through the fund.
CNN reported that as of April 16, the SBA had approved more than 1.66 million loans for more than $342.2 billion, according to an agency report. Of those, 4,412 loans were for $5 million and above. The high-value loans represented 0.3 percent of the total number of loans and 9 percent of the overall dollar value.
“People think it was all the Main Street USA businesses and it wasn’t,” Smith said. “I was never planning to get something. I was hopeful to get something.”
In early March, Smith went to her creditors to see what kind of arrangements could be made and got her business some breathing room.
“We were very successful,” Smith said. “We got a couple more months.”
Now she’s assessing what she can do sales-wise to survive in the long-term.
“In-store events were one half of our revenue,” she said. “We stopped having events before we were told to. Now I’m planning for the worst, a year-and-a-half of no events. Whatever local businesses people hold in their heart, they should support.”
High marks to small banks, credit unions
Based on a sample of area business owners, it seems that the local businesses that got funds have their smaller banks to thank.
As NPR reported, the business advocacy group National Federation of Independent Business (NFIB) surveyed a random sample of the 300,000 businesses in its membership database, and found that only about 72 percent of businesses that tried to apply for a PPP loan were able to successfully submit an application.
Heiner started with her bank, Members Trust Credit Union on Mangum Road. But when she was told it wasn’t taking applications because it was still working through the process, she went to another bank that didn’t require her to be a member. When her application was denied there, she returned to Members Trust two days before the money ran out and resubmitted successfully through them.
The money she received will allow her to pay instructors to provide Zoom step classes to students at reduced rates.
Rosemond banks with Resource One on 43rd Street and said she was pleased with the service provided by the bank’s business development manager.
“They are very focused on local businesses,” Rosemond said.
Mark Joyce, the Director of Commercial Lending at Resource One, said being bigger could have been a disadvantage during the process whereas “smaller, more nimble” institutions could make changes more quickly.
“We all went through the same thing,” Joyce said, noting that the SBA issued final rules April 2 when the start date for applications was April 3. “I spent the night reading the rules. We had a great team and could implement the rules the next day.”
While many are in the pipelines for funds, should they be replenished, some have entertained the option of switching banks.
“I’m probably moving to a regional bank,” Smith said.
Said Candice Croker, the director of Johnson Memorial School on 43rd Street: “I wish we banked with a smaller entity because we probably wouldn’t have fallen through the cracks that way. I don’t even know if our loan application was reviewed or even considered before the PPP ran out of funds.”
Joyce said that part of the confusion stems from the national news conference where officials talked about the ease of the application process. In actuality, the process was much more complex and Resource One has had to educate its clients along the way.
“Also the expectation is that this is free money and it’s not. It’s a promissory note,” Joyce said. “The terms for forgiveness are highly conditional. Good records are a must.”
The SBA website says at least 75 percent of the forgiven amount of a PPP loan must have been used for payroll.
One of those still hoping for much-needed funds is Ricky Cruz, the owner of HTX FightCamp. He, like Carroll, was approved for the PPP loan but did not receive funds. Cruz said he is still in consideration for the EIDL loan.
“My number is in line well over the ($246,000) mark according to the (website),” Cruz said.
Rosemond said that the SBA told her she was one of the first people in Texas to apply for the EIDL.
“I’ve called several times,” she said. “(They) say it’s being processed.”