Intensive Care for Small Business
To use a medical metaphor, the US economy is in the intensive care unit, at least as far as Forest Park’s many small businesses are concerned.
Karen Mills, a senior fellow at Harvard Business School, said small businesses typically have around 27 days of cash on hand, and restaurants in particular only have an average of 17 days. “If you run out of money,” Mills said, “you’re dead.”
The National Federation of Independent Businesses estimates that due to business lockdowns in response to COVID-19, “half of small businesses could close in two months and another third in three to six months.”
Lynn Sorice, owner of several establishments in Forest Park, said: ‘What scares many of us is how long it will take to bring demand back to an acceptable level of normality. Discretionary spending is common and can be fickle. In the long run, all of us who are qualified will eventually get a PPP loan. Even with this loan, not all of us will survive and that scares me.
And, when small businesses aren’t open for business, employees are laid off and don’t receive paychecks — 22 million workers nationwide have filed for unemployment since social distancing went into effect.
To continue with the medical analogy, this is why federal CARES Act small business loans like the $349 billion PPP (Paycheck Protection Plan) can be, like ventilators for those infected. by the coronavirus, the difference between life and death for hundreds of businesses in Forest Park.
And that is why there is a palpable sense of urgency in the local business community. Companies are rushing to demand the life-saving “transfusion” of money. Loan officers from the two local banks worked overtime to provide them with the necessary financial injection.
Dan Watts, president of Forest Park Bank, said as of April 20, 150 businesses and organizations had applied for or expressed interest in PPP loans and 105 had already been approved by the bank and referred to the Small Business Administration (SBA). for a final green light.
Loan amounts range from the smallest at $5,000 to the largest at $1.5 million.
He said reviving the PPP can be key to Forest Park’s economy noting that small businesses are the ‘backbone’ of our economy and if small businesses stay open their employees will keep their jobs. When they get regular paychecks, they can afford to pay their rent, and their landlords have enough income to pay their mortgages, and everyone can buy things from retail stores in town.
“Our economy,” he said, “is like a complicated machine with many components. When one of these parts gets stuck, it has an effect on the whole machine.
Watts said the rollout of programs created by the CARES Act has not been seamless, as President Trump boasted shortly after signing it into law on March 27. The business administration and treasury department were inundated, what was accomplished is “incredible”.
As in the Obamacare rollout, Watts said, there have been delays and problems. As of April 9, two weeks after the CARES Act was enacted, Forest Park Bank had 105 loans ready for disbursement, but they had yet to access the SBA system.
Once that happened, Watts credits his three commercial lenders who worked through the Easter weekend and late into many nights to get the loans processed so the money could flow to small businesses. local. Watts said the first loan was funded on April 16.
When asked if he was in competition with the branch of the American bank at the corner of Madison and Desplaines for business, the president of Forest Park Bank replied that in this situation everyone was on deck and that the banks worked together to obtain the loans. get out as soon as possible.
Another unforeseen delay was that the SBA ran out of money to fund more loans. The $349 billion provided by the CARES Act had already been exhausted on April 16, which meant that until Congress reloaded the PPP with additional funding last week, lending institutions, including Forest Park Bank , were not accepting applications until more money was made available.
Watts expressed some frustration with Washington Democrats for delaying the PPP reload by insisting that additional funds for hospitals and local governments be added to the bill. “That’s not to say,” Watts said, “that the economy doesn’t need these additional programs, but linking this discussion to this successful program is going to be detrimental to many businesses.”
The way the CARES Act is written, PPP loans can indeed become grants if, after eight weeks of receiving their loans, companies can show that at least 75% of the money received has been used for wages.
The problem with that eight-week stipulation, Watts said, is that restaurants in the city, for example, aren’t paying salaries to their employees during the lockdown, so if they receive funding on April 17 and they are not allowed to reopen until the end of May a large portion of the loan will not be eligible for forgiveness. That’s why he hopes Congress will pass an extension to the eight-week requirement.
“The PPP program works,” Watts said. “It’s amazing. Everything from trucking companies to tool and die stores, restaurants and churches have applied. We’ll see if this stimulus is enough to keep businesses going and people employed. . »