Tuesday, August 4, 2020
Aug. 4, 2020

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PPP no pandemic panacea for Clark County businesses

Paycheck Protection Program loans have helped thousands of firms, but lingering uncertainty keeps owners on edge

By , Columbian business reporter
Published:
6 Photos
Owner Marian Adams-Manuel, background left, works with chef Vale Martinez in the busy kitchen of Frontier Public House on Tuesday. The Vancouver restaurant received Paycheck Protection Program loans to help bridge the financial gap caused by COVID-19.
Owner Marian Adams-Manuel, background left, works with chef Vale Martinez in the busy kitchen of Frontier Public House on Tuesday. The Vancouver restaurant received Paycheck Protection Program loans to help bridge the financial gap caused by COVID-19. (Amanda Cowan/The Columbian) Photo Gallery

Business owner advocate Eric Sawyer began organizing the weekly Zoom calls with an initial group of about 18 local restaurateurs, most of whom he knew through his work at the Vancouver consulting firm BBSI. The roundtable discussions started out fairly broad, he said, because nobody had a good handle on what was happening.

It was late March, and the previous two weeks had seen the COVID-19 pandemic rapidly expand from a background worry into the defining feature of daily life as a series of stay-at-home orders shut down everything from the 2019-20 NBA season to the Clark County food scene.

“All this stuff was really new and fresh, and we had no idea how long it was going to last,” Sawyer said.

The roster of callers kept expanding, and by the third or fourth week there was one overarching topic of conversation: the Paycheck Protection Program. Created as part of a massive federal economic rescue package, the program promised business owners a lifeline in the midst of an unprecedented economic storm.

It’s been three months since the program debuted, and most of the callers have managed to navigate the initial obstacles and grab the lifeline — but long-term stability remains elusive.

PPP loans

More than 6,400 Clark County businesses received PPP loans.

84% of the loans were for less than $150,000.

Confusing applications

The program offers businesses the opportunity to apply for loans of up to $10 million to cover payroll expenses, supplied by local financial institutions and guaranteed by the U.S. Small Business Administration. Business owners can eventually have the loans forgiven if they met certain conditions, including spending most of the funds on payroll.

“In general, the big idea was ‘Let’s try to keep people employed,’ ” said U.S. Rep. Jaime Herrera Beutler, R-Battle Ground.

Several local business owners who spoke to The Columbian recalled a chaotic few weeks following the program’s April 3 debut. The application system and guidelines changed almost daily, forcing many owners to redo their applications multiple times.

“By the third or fourth time we asked some of them to fill out an application, they were just looking at us like ‘What is going on?’ ” said Kim Capeloto, vice president at Vancouver-based Riverview Community Bank.

There also wasn’t much communication from the SBA once the applications were submitted, leaving business owners in the dark about their application status until they got their approval notices.

“It was like, ‘Might as well have thrown it into a black hole,’ ” said Richard Anthony, president of the Surgical Training Institute in Camas.

At the same time, banks and other lending institutions struggled to keep pace as thousands of businesses all rushed to submit their applications. Capeloto described bank employees working late into the night. By mid-June, Riverview had processed more than 780 loans, he said.

Despite the confusion, Capeloto said the rollout went about as well as could be expected, considering the sheer amount of money being distributed and the unprecedented scale and speed of the program.

Marian Adams-Manuel, co-owner of Frontier Public House in Vancouver, said she had applied for a previous SBA loan and was surprised by the comparatively small amount of information required by the PPP applications.

Anthony recalled the process he went through to obtain a disaster loan for a different business following Hurricane Katrina, and said the PPP program was comparatively smoother — although there were still significant management and communication problems, he added.

Stay-at-home conundrum

Sawyer’s restaurant industry roundtable continued during the program rollout, offering owners an opportunity to compare notes on their progress. But as more owners completed their applications, the discussion zeroed in on a specific problem.

The original PPP rules gave businesses eight weeks to use the funds and required them to spend at least 75 percent on payroll expenses. But Washington’s stay-at-home order compelled nonessential businesses to stay closed, or operate on a delivery-only model that required fewer employees than usual — and many owners had already laid off large portions of their staff in the preceding weeks.

Some owners, such as Bryan Shull of Vancouver’s Trap Door Brewing, said they were able to keep employees busy with cleaning and remodeling projects. But others said they were unable to bring their employees back to work, because there was no work to be done. Restaurants were the most prominent example, but several other firms were in a similar position.

“I had all this money sitting in my bank account and I wasn’t able to use it,” said Kisar Dhillon, owner of Burntown Fitness in Vancouver.

The conflicting messages — coupled with a lack of communication from the SBA — prompted Sawyer and other participants in the Zoom group to begin inviting elected officials to join the calls in April.

Herrera Beutler said she started out by texting with various local restaurant contacts and eventually became a regular participant on the Zoom calls. The restaurant industry group was one of the biggest, she said, but there were similar conversations taking place across many of Clark County’s employers.

With elected officials dialed in, the restaurant owners began to collectively advocate for changes to the loan terms.

“I think a lot of people (in Congress) were getting this feedback across the country,” Herrera Beutler said.

The nationwide feedback from restaurants and other businesses prompted a congressional push to improve the PPP terms, she said, culminating in the passage of the Paycheck Protection Program Flexibility Act in late May, which lowered the payroll expense requirement to 60 percent and extended the deadline to use the funds from eight weeks to 24 weeks, among other updates.

Making it through

The Paycheck Protection Program’s initial $349 billion pot of funding ran out after less than two weeks, prompting Congress to infuse it with another $320 billion in late April. Approximately $130 billion remained unclaimed as the program approached the original June 30 application deadline, prompting Congress to extend the deadline to Aug. 8.

The SBA released the first comprehensive set of PPP loan data on July 6, about three months after the program began. According to the records, just over 6,400 Clark County businesses received PPP loans, about 84 percent of which were for less than $150,000.

Local businesses reported using the loans to save a collective 66,509 jobs, according to the data — more than one in three of the roughly 172,100 total jobs that Clark County boasted in March before the start of the pandemic.

Meanwhile, Clark County’s economy has slowly started to reopen. The county reached Phase 2 of Washington’s four-stage reopening plan in early June, which allowed several sectors, including retail and restaurants, to resume limited in-person operations.

Not every business will survive the pandemic. The list of notable permanent closures includes familiar names like Joe’s Crab Shack, Lapellah and Mill Creek Pub. But several local business owners said they’ve reached relatively stability, often by using the PPP loans to buy time to reconfigure their operations.

Nanci Meadows, people champion at Vancouver software company Hubb, said the PPP loan kept the company afloat while it reconfigured its core event management software platform for virtual events, adding options like video chat.

Dhillon said he overhauled his fitness studio to allow for professional-quality streaming video for remote classes. And at Trap Door, Shull said the brewery was able to carry itself through Phase 1 thanks to a combination of its beer delivery business and the PPP loan.

“We’re losing money, but we would’ve been in real big trouble without the program. So it’s doing its job,” he said.

Lingering threats

At this point, are Clark County businesses out of the woods? Sawyer has continued to host the weekly Zoom calls — now with a roster of about 70 local restaurant owners — and based on those conversations, he offered a succinct assessment.

“There is zero stability,” he said.

PPP loans are bridging the COVID-19 gap so far, but the gap seems to be getting wider as challenges with both the virus itself and Washington’s reopening rules persist.

The Phase 2 rules require restaurants to stay at less than 50 percent capacity and maintain 6-foot distances between tables. That’s enough to allow some places to bring back at least part of their staff, but it’s far from an ideal set of operating conditions, said Mark Matthias, owner of Beaches Restaurant in Vancouver. Even when the cap is raised in subsequent phases, he said, the 6-foot separation rule will still create severe spacing limits.

Timing also remains a question. Clark County submitted its application to move ahead to Phase 3 on July 3. But a few days later Gov. Jay Inslee announced a two-week freeze on further advancements due to a resurgence in COVID-19 case rates throughout the state, including in Clark County.

The worst-case scenario would be if the resurgence were to force the county to fall back to Phase 1. Sawyer said there’s a clear consensus in the restaurant industry group that a return to lockdown conditions would ruin their businesses, with or without the PPP loans.

“That, in an instant, will put out 50 percent of the restaurants and mom-and-pop businesses that are hanging on,” he said. “That will be the punch to the gut that they cannot overcome.”

Anthony said the Surgical Training Institute is among those businesses that have reached a new stability point, but he now spends his time worrying about the other businesses in his industry that couldn’t survive even with the PPP option.

Restaurants and entertainment venues have been the most visible business victims, he said, but the loss of surgical training centers could have long-lasting impacts on public health. The medical field is peppered with those sorts of quiet, but essential, niche operations, he said.

“There’s a million businesses like that in America, and a million of them are damaged by this, in ways you can’t envision,” he said.

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