Chandler businesses utilize federal loans to mitigate COVID-19 impacts

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Kristina Gwinn applied in early April for the first round of funding from the Paycheck Protection Program to help keep her employees paid during the coronavirus outbreak that limited the service she could offer at Sidelines Grill in Chandler.

She applied with her usual bank and heard nothing back. She then applied with a smaller bank and did not hear anything for days.

“All you do is make phone calls every day hoping and praying you hear something,” Gwinn said.

Gwinn received approval in mid-April for the loan and a loan number, which meant she had made the cut for the first round of funding just in time, as it was announced funding had run out the next day. She said she cried when she saw the email.

“I’m a single mom of three; I run a little neighborhood mom and pop shop,” Gwinn said. “It’s very scary. I don’t think I have ever relied on my faith more than I have in the past six weeks.”

The Paycheck Protection Program is a Small Business Administration loan intended to help businesses keep their workforce employed during the COVID-19 pandemic. The loans are forgivable if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest or utilities, according to the SBA.

The first round of funding, which began April 3—about $349 billion—ran out in two weeks. In Arizona, 19,280 loans were fulfilled in that round, totaling around $4.8 billion.

A second round of funding was approved in late April for an additional $310 billion, and businesses could begin applying April 27. In the second round of funding, Arizona saw nearly 41% of eligible small businesses receiving loans compared to 17% the first round, according to data from the Greater Phoenix Economic Council.

Many local businesses in Arizona, and in Chandler, did not get loans in the first round, leaving them to exist off savings for longer or temporarily close, according to business owners like Gwinn. The businesses that did not get it the first time were encouraged to try again the second time—and Arizona data shows more businesses received the loans in the second round of funding.

“It’s been a rough couple weeks,” Gwinn said. “I’ve put a lot of money aside this last year. I know we are going to be OK, but after 18 years I put so much money aside —and it’s dwindling, dwindling, dwindling. I see it going out the door so fast.”

Second round of funding better for Arizona

Kristen Stephenson, vice president of research and analytics at the Greater Phoenix Economic Council, said Arizona ranked 46th in the country for the amount of funding allocated in the first round of funding.

“What we had been analyzing was the number of small businesses in Arizona, versus the number of loans,” Stephenson said. “It boils down to one out of every six businesses receiving funding, or about 17 loans per 100 applications.”

Stephenson said she hoped that GPEC’s efforts to educate business owners on best practices prior to the second round of funding would help more Arizona business owners secure loans. Officials were not sure what caused Arizona to rank so low in the first round, but hoped that educating business owners on the application process would help in the second round.

According to data from the Small Business Administration released May 4, Arizona received $3.7 billion through nearly 44,000 loans in the second round of funding. Relative to other states, Arizona ranked 16th in PPP loans and 15th in PPP dollars, according to data from the Small Business Administration.

“We want to thank our partners and the community for coming together to support the region’s small businesses during the application process, which resulted in [the] state ranking significantly higher nationally for approved loans and dollars,” said GPEC President and CEO Chris Camacho in a statement. “These efforts are indicative of Greater Phoenix’s undeniable spirit rooted in strength, collaboration and resilience. Even in times of uncertainty and crisis, Greater Phoenix becomes Greater Together.”

Chandler’s Economic Development Director Micah Miranda said the city worked as a conduit for information during the second round of funding to help business owners access the resources they needed. Miranda said the biggest takeaway from the first round of funding was the importance of relationships with banking institutions, since bankers are ultimately the ones making the call on who gets funding.

“Having personal relationships with people we do business with really matters,” Miranda said. “Banking clients don’t want to just be a number, you want to have a two-way street of communication.”

Challenges, concerns with PPP funding

Some businesses were told they were not eligible for the loans, due to the way they contract with employees. Employees that are contract workers, or 1099 workers, could apply for funding on their own but a business with only contract workers would not be able to claim their wages in a way that would allow them to receive funding.

FLO Yoga & Cycle owner Debbie Davis said her downtown Chandler business has been closed since mid-March, even before Gov. Doug Ducey closed non-essential businesses.

“We applied for everything and we’ve been told we don’t qualify for PPP funding because our employees are contractors,” Davis said. “Our instructors come with their training—they work at multiple studios. Each of those instructors can go to their bank and apply, but that doesn’t help us retain instructors and it doesn’t help us pay rent.”

Davis said even as the governor began to reopen businesses that were previously closed in executive orders, fitness studios were left in a lurch.

“I think the helplessness of it all is what people don’t appreciate right now, there is very little compassion for people who say, ‘I want to open my business,’” Davis said. “... There’s a lot of attention on restaurants and retail. Fitness studios have been completely shut down from day one. It wasn’t like reducing class size. The way we pay people, we don’t qualify for aid and all the solutions like social distancing and wearing masks aren’t practical when you’re working out.”

Jonathan Frutkin, principal at Radix Law in Phoenix, said in the first round of funding he found that the clients who were most important to the banks received loans, while others never heard back.

“A large percentage of the money went to just a handful of businesses—42% went to just a handful of companies and what that means is that larger businesses were able to secure funding the first time around,” Frutkin said. “Our expectation with the second round is that smaller businesses would have a chance to secure funding because the first round funded the big companies. But we don’t expect everyone to get funding.”

Frutkin said that because the loans were distributed by banking institutions, there may be cause for business owners who did not get funding to pursue litigation against the banks.

“It was a poor idea, poorly executed,” he said. “The concept behind this was to have enough money to keep people employed. Business owners are going to see themselves getting loans that they are going to have to pay back because they are not able to keep people employed or don’t fully understand the terms of the loan. We are looking at years of potential litigation of the decisions that were made by the banks. Like many things that were done in this emergency situation, the ramifications are pretty substantial.”

Finding the light at the end of the tunnel

Sibley’s West, a gift shop in downtown Chandler, opened May 4 for retail appointments, and opened further on May 8 while taking precautions like staff wearing masks and staff offering masks and gloves to patrons.

Owner John Wolfe said just two weeks prior to reopening on May 4, the business received the loan funds. He and his wife, Michelle, own the business together and were trying to determine whether or not they wanted to use the loan money at all, given the potential risk of paying the loan back.

“It’s hard from a business standpoint to commit yourself to a loan if you didn’t know when you might open and be able to pay back,” Wolfe said. “We were kind of on the fence about it. But when the governor made his announcement, we quickly got the team together and posed it to them to ask them if they’d like to come back. The PPP gives us eight weeks of leeway, where we are getting funds to operate the store even if store revenues aren’t normal.”

Wolfe said his business is more like a family, and said there has been a sense of togetherness among small business owners in downtown Chandler.

“Really, I think the PPP is a reflection of the camaraderie that small businesses have and from a small business owner standpoint, it gives us a cushion for eight weeks to keep on our staff and operate even though things aren’t normal,” Wolfe said. “It will get us to mid-June, in the hopes that things are more normal after that.”

Gwinn said she had still not received funding as of May 6, but saw a light at the end of the tunnel as Sidelines Grill began to open. She said she knows recovering from the financial losses she has already incurred will not be easy.

“I am going to fight for this because this is all I have,” Gwinn said.


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