PPP: Lifesaver with a Lot of Headaches | Economy | Hudson Valley | Chronogram Magazine

On March 22, all nonessential businesses in New York State were shut down by executive order of Governor Andrew Cuomo. In the mid-Hudson Valley, as elsewhere in the nation, the Paycheck Protection Program (PPP), launched on April 3 by the Small Business Administration (SBA), offered immediate help by providing funding to companies and nonprofits of 500 employees or fewer to keep people on the payroll.

Three months into the crisis, however, the value of that assistance is being called into question, as many companies weren’t able to meet the requirements, which means they have to pay the money back.

The River spoke with several business owners across a range of industries to see how the program has worked—or not—for them. Many businesses remain closed, or will only partially reopen, so they won’t be able to hire their employees back or keep them on the payroll, as the PPP terms require. They’re still in crisis, and it’s not clear where the next round of money will come from to keep them going.

Unlike the SBA’s Economic Injury Disaster Loans (EIDL), which were expanded on March 12 to help businesses deal with the COVID-19 emergency, the PPP money came with a huge perk: If a business used 75 percent of the funds for keeping employees on the payroll over a period of eight weeks, it did not have to pay the money back. The remaining 25 percent could be used for mortgage payments, rent, and utilities. At the end of the eight weeks, the recipient would apply for forgiveness of the money. If the business did not meet the forgiveness requirements, it would have to pay the funds back to the issuing bank—companies had to apply for the money through their bank—as a two-year loan at one percent interest. 

Legislation that President Donald Trump signed into law on June 5 eases those restrictions, allowing businesses to pay only 60 percent of the PPP money on payroll and extending the time periods for spending the money from eight weeks to 24 weeks and for hiring back employees from June 30 to December 31. The loan repayment period has also been extended, from two years to five. It’s the latest in a long line of rule changes governing PPP, creating confusion for many of the businesses but also allowing for more flexibility, such as being able to hire new people rather than the original employees.

According to the SBA, as of June 6 nearly 294,000 business owners in New York State have accessed PPP loans, totaling $37.4 billion. Nationally, $511.3 billion has been dispersed to more than 4.5 million businesses. There’s been little of the promised oversight of the program; despite pressure from Congress, Treasury Secretary Steve Mnuchin has refused to publish a list of loan recipients, and the Trump Administration has not provided such data to the Government Accountability Office.

It’s not the only aspect of the program that remains a mystery.

The “Best Program for Employers”…

For many small businesses and nonprofits, the PPP money was a lifesaver. But others said the program was so mired in confusion, with so many rule changes, they’re still not sure if they’ll get forgiveness or have to repay the loan. Others said the PPP is too restrictive and does not address their fundamental needs.

Despite the problems, there’s no question PPP was desperately needed. “In the first round of responses [to the PPP], 67 percent of small businesses with under five employees projected losing from 75 to 100 percent of their revenue,” says Frank Castella Jr., president and CEO at the Dutchess Regional Chamber of Commerce. According to a McKinsey & Company article published May 5, 30 million jobs belonging to small businesses—defined as companies with 500 employees or fewer—were vulnerable in the six weeks since the shutdown. Of those with fewer than 100 employees, half of all jobs were vulnerable.

The government had to act fast. “Originally, PPP was intended to get into the hands of businesses quickly so they didn’t lay anyone off,” says Lisa Berger, director of Ulster County’s Office of Economic Development. “The money was supposed to be used to pay people and keep them on the books. What hadn’t been anticipated was a complete closedown when nobody would go to work.”

Chuck Petersheim, owner of The Catskill Farms, a second-home construction firm based in Wurtsboro, said the PPP money “benefited our bottom line and allowed us to keep our employees working without any reduction in pay or benefits. It kept us whole and confident.” The 11-employee building firm has “continued to operate and have demand for our services. PPP gave us that little bit of extra confidence to tiptoe forward as opposed to not spending a penny” during the months of March and April, when business shrunk by 80 percent. Urban flight has since spurred demand for Catskill Farms’ houses, and by bridging the gap, “PPP worked as exactly as it was supposed to,” Petersheim says.

The company’s good relationship with a community bank made applying for the money “relatively straightforward,” he adds. And his company’s professional accounting and bookkeeping services were able to easily navigate the rules and provide the paperwork required for the 11-page application for forgiveness. Small mom and pops who have to handle the paperwork themselves might be less successful: “My concern is the forgiveness criteria are not understood well enough, so they will get stuck with the loan,” Petersheim says. 

Mike Polasek, chef/owner of Simply Gourmet, a catering firm based in Poughkeepsie that’s pivoted to delivery of prepared meals, also greatly benefited. “PPP is the best program that’s come forward for employers,” he says. “Payroll is our highest cost, and without the program and the ability to do business, we would have had to lay off staff. The money not only benefits them, but it benefits us, since we’re not looking at higher unemployment costs.”

However, Polasek said he wishes he’d known sooner he had 24 instead of eight weeks in which to spend the money. “I would have waited until June to start the forgiveness piece,” he says. “It’s frustrating I had to use the money right away,” a time pressure that caused him at times to pay overtime, for example, which he otherwise would have avoided. Plus, while he has adjusted well to the draconian changes in the market, he is not out of the woods yet. “Next week the money will run out, and you can’t reapply,” he says. “The reality is setting in that we may not cater at all this year.” Polasek also operates the café at the FDR Library, which normally opens April 1; even if it does open in the near term, it won’t be at full capacity. Having lost more than 75 percent of his business, he may not be able to continue keeping all his staff once the PPP funds run out. “I don’t know what the future holds,” Polasek says. 

…If They Can Get It 

Other businesses are far less certain about getting the money forgiven—and some have yet to get a dime. Gina Vanicore Tish, one of four family members who own and operate Dream Weavers hair salon and restaurant in uptown Kingston, said she tried to apply online three times for the PPP money, not realizing, until she was clued in by a family friend, that one must apply through a bank. (Indeed, when the program was first announced, banks themselves had to apply to participate in the program, says Berger; the businesses first in line were those that had existing relationships with banks that in turn had a relationship with the SBA. “A big lesson is that you should have a relationship with a commercial banker who knows you and you know them,” Berger says.) 

Dallas Gilpin, proprietor of the Dutch Ale House, Windmill Wine and Spirits, and the Kitchen at Shale Hill Farm, all based in Saugerties, got the funding in the first round, which was “really lucky; some banks didn’t know how to do the paperwork, or the money had run out.” Before the pandemic, she had 37 employees, about half of whom were part-time. Figuring out how to calculate the full-time employees in order to qualify for forgiveness has been incredibly confusing. “We’re flying blind on what we’ll need to pay and how to allocate the money to get it forgiven,” she says. 

The rules for rehiring have also changed multiple times. “At first, they said we have to hire back the same people,” which was problematic since “the large majority did not want to come back because they’re making so much money on unemployment.” The requirement subsequently was changed to enable a business owner to hire new people. (The $600 federal government weekly unemployment bonus meant that many people on unemployment made more than at their former jobs, particularly in cases where business owners would have had to cut their employees’ hours.) “At one point, the recommendation was that you had to provide letters from employees saying you had offered them a job, but nobody would sign it because then they wouldn’t get unemployment,” Gilpin said.

She adds that without forgiveness, the money is a loan on which the payments would be “astronomically high” given the relatively short repayment period (by contrast, the EIDL loan is structured much like a 30-year mortgage). Businesses like Gilpin’s, which will reopen on a very limited basis, with fewer customers and higher expenses given the necessary safety protocols, will have it even harder. She is currently building an outdoor dining area at the Dutch Ale House, which will open June 24. 

Genia Wickwire, business manager at Kingston-based Ulster Publishing, said the shutdown caused local advertising to abruptly cease for the company’s four newspapers, just as the season was about to pick up. Ulster Publishing switched to a digital platform and laid many employees off. The company got PPP money in the second round, but “the formulas presented by our accountant that had more forgiveness didn’t make sense for us,” she says. For example, “we get this money back if we hire everyone back, but then I’ll have salespeople who have nobody to call.”

Adding to the confusion: “The formula keeps changing,” regarding, for example, how you calculate the number of full-time employees. “You’re having to think who you hired back and when.” Printing is Ulster Publishing’s second-highest expense, after payroll, and with the company dedicated to putting out its newspapers again—it recently started printing one edition that combined all four of its previous standalone newspapers—getting forgiveness for that cost would have been more valuable than payroll, Wickwire says. In the meantime, “we haven’t been using the money to our fullest ability because it’s unclear what the forgiveness is for. For a small business to have more debt really makes you sick to your stomach.”

Proceeding With Caution

Other companies have also adopted a wait-and-see approach. “We knew there was going to be a change, so we’ve proceeded cautiously,” says Patrick Dodge, administrative director at the Emerson Resort and Spa, located in Mount Tremper. Extending the requirement to rehire employees from June 30 to the end of the year “more realistically reflects the time it will take to get things moving again.” Indeed, he hopes the forgiveness period will be extended even longer, given that businesses such as the Emerson likely will not fully open until next spring. In the meantime, “we won’t take full advantage of the PPP loan forgiveness provision until we start reopening and bringing folks back.”

That uncertainty has resulted in $12 billion worth of PPP money actually being returned to the government, according to an article published June 10 in The New York Times headlined “$130 Billion in Small-Business Aid Still Hasn’t Been Used.” The Times reports that many small businesses returned the entire amount of their PPP money to the government because, particularly for those that remained shut down, they knew they wouldn’t qualify for forgiveness and wanted to avoid financial ruin.

In retrospect, Darin Seim, president of R&F Handmade Paints, a manufacturer of artists’ encaustic paint and oil sticks in Kingston, says he wished he’d waited for the second round of PPP money, given all the rule changes that have occurred since he got the money on April 23. Instead of furloughing the company’s 16 employees for a week and a half (after he’d paid them for a month, even though the company had closed), he would have furloughed them for an additional two weeks or so and hired them back after receiving the money on May 18. “It’s funny to give someone a loan and say ‘We will forgive you and give you some of the guidelines and rules later,’” says Seim. He “feels for the banks,” which “were asked to loan out a ton of money with very little guarantee” and at such low interest “they’re not going to get much back for it…. It’s a government program they pushed onto the banks and the small businesses to avoid responsibility.” 

R&F has partially reopened, with employees working on split shifts, and the company is busy fulfilling a backload of orders. But Seim worries about a long-term decline in demand, given the lingering negative economic conditions. For the economy to recover as a whole, “more money is needed. It’ll be a couple of years before we know how this plays out.”

Nicole Clanahan, a freelance bookkeeper based in Clinton Corners who works with businesses across multiple industries, said the rehiring provision was complicated for some of her clients because some employees were afraid to come back to work because of the health risk or because they have an elderly family member. (Disclosure: Clanahan does bookkeeping for Chronogram Media, The River’s parent company, which received PPP funds.) The PPP money was also counterproductive, in that “some employers were paying employees who aren’t coming to work, and meanwhile they’re paying employment taxes on that money.” Another problem for some companies was that owners can’t count themselves as being on the payroll, although sole proprietors “could apply for PPP and get eight weeks of income.”

Chris Silva, executive director of the Bardavon, Ulster Performing Arts Center, and the Hudson Valley Philharmonic, applied for $172,000 of PPP money even though he had to lay off most of his 21 full-time employees (the company is paying them one or two days a week so they can get their healthcare benefits), betting that the terms of the stimulus would be expanded—as it was. The money “helps for sure, but only for a couple of months. For a business like ours, which will be the last to reopen”—he’s hoping in 2021—“we need more time and more money.” 

The PPP money enables Silva to pay three full-time people for the long term. Although the nonprofit’s bank has been “unbelievably supportive,” he says “no one actually knows what’s going on. We’ve had attorneys, accountants, and lobbyists look at this and it keeps changing.” Silva said arts organizations such as his have been particularly hard hit: Of the federal government’s $3 trillion stimulus package, only $75 million was designated for the arts, and of that, $25 million went to the Kennedy Center, leaving only $50 million for arts organizations across the entire nation. With a $3.6 million operating budget, Bardavon, UPAC, the Hudson Valley Philharmonic are projected to lose $2 million this year and possibly another $2 million next year, he says. “Our costs are $75,000 a month. We need $1 million.”

Across the river, Omega Institute has laid off half of its approximately 100 employees and similarly took the PPP money believing that if it didn’t initially qualify for forgiveness, the terms would change. Omega CEO Robert “Skip” Backus says the $1.7 million it received from Rhinebeck Savings Bank was “a lifesaver,” even though it does not replace the lost revenue. The money was especially needed because the $2 million emergency loan Omega expected to receive through EIDL—it applied for the maximum amount allowed—was unexpectedly capped at $150,000 by the SBA after the government program ran out of money, Backus said.

“We were buying time and took the gamble that eventually somehow if we had to pay the money back we’d find it down the road,” he adds. To keep everyone on staff, as the PPP forgiveness required, “made no sense” since the business is shut down, but “it does make sense to have longer-term financing.” The money also helped Omega set up programs online and otherwise “reimagine ourselves,” Backus says.

Right now, the holistic learning center plans on reopening in 2021, although “we’re in major uncharted waters.” Omega furloughed people with full benefits, but Backus concedes that he’s “at a spot I can’t afford to keep their health insurance…. when the additional $600 government payment runs out [scheduled to end at the end of July], it will be quite the wakeup call.” Those who have remained on staff have had their hours reduced. Eight million dollars in the hole, Omega is about to launch a major fundraising campaign and is keeping alert to additional aid programs. “At some point, you run out of time. We’ll start to see organizations go under and cease to exist,” Backus says.

According to an economic impact study Omega did a couple of years ago, the institution attracts 20,000 people a year and is an $18 million economic engine for the region. Even much smaller operations have a significant ripple effect on the local economy. Take the example of Gilpin’s three businesses, which buy from local farms, breweries, and florists. “A guy locally does our linens, but now he’s shut down so we’re left going to Target to buy sheets,” Gilpin says.

“I’ve lost a lot of sleep over the last couple of months wondering how to think creatively and save this small town,” she continues. “I am raising three kids here and want to work hard to re-create the community…. if there was ever a time we just need to have the government throw free money at small businesses, without so many restrictions and with a longer leeway, it’s now.”

Paycheck Protection Program Resources

The SBA’s first round of PPP money, announced on April 3, amounted to $349 billion and ran out in 13 days. Later that month, the SBA introduced a second round, amounting to $310 billion, which companies can still apply for. Small businesses and 501(c)(3) nonprofits having 500 employees or fewer qualify and need to apply through their bank.  For help in applying, whether it be webinars, information posted online, or talking to a person on the phone, check out these resources:

Dutchess County Regional Chamber of Commerce

Ulster County Office of Economic Development

Representative Antonio Delgado (NY-19)

Representative Sean Patrick Maloney (NY-18)

Small Business Administration

Lynn Woods is a local journalist who formerly wrote a column for Kiplinger’s Personal Finance magazine and contributed to national business publications. She is also co-director and co-producer of the documentary film Lost Rondout: A Story of Urban Removal.

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