Most Iowa business owners did not get COVID aid. Will this new round be different?

Laurie Ray, owner of Mill Creek Restaurant & Lounge, is applying for federal and state aid to help keep her business afloat during COVID-19. (Photo courtesy of Laurie Ray)

Loud bowling lanes and colorful children’s birthday parties would typically bring vibrancy to Bryce Smith’s local business, Adel Family Fun Center.

But like many other businesses, Smith was forced to close most of his operation following Gov. Kim Reynolds’ emergency health proclamation on March 17, in an effort to mitigate the spread of COVID-19.

While he is still operating the restaurant side of his business, he is losing 60-75% of typical monthly revenues and furloughed most of his employees.

To stay afloat, Smith researched and applied for the Small Business Administration’s Paycheck Protection Program and emergency disaster loans. He also applied for an $18,000 grant through Iowa Economic Development Authority.

It wasn’t until April 17 that he received his first requested aid — a loan from the Paycheck Protection Program. Nothing else has come through yet.

“Emotionally, it’s stressful,” Smith said. “The first thing I did was delete the mobile banking app off my phone because there’s nothing I can do checking it four times a day.”

Even in late April, small businesses continue to struggle to receive aid.

Only 2 in 10 businesses received paycheck protection loans

A survey conducted by the National Federation of Independent Business showed that as of April 17, only 20% of businesses that applied for a PPP loan received that money, which was created last month to help small businesses stay afloat amid stay-at-home orders.

For those who applied for an Economic Injury Disaster Loan, the response rate by SBA is even worse — 99% of businesses still haven’t received a loan. About 10% of businesses who applied for an EIDL grant received one, according to the NFIB survey.

In Iowa, SBA approved 29,424 paycheck protection loans for a total amount of $4.3 billion as of April 16.

The lack of money is particularly difficult for small businesses, which typically don’t have more than two months’ worth of savings to stay afloat without generating revenue.

“A lot of our small shop people that were forced to close down are counting on this money,” said Matt Everson, Iowa director of the National Federation of Independent Business. “We’re talking $10,000 to 25,000 bucks that can help these small businesses supplement their losses.”

Congress advances legislation with millions more for business relief

The U.S. Senate on Tuesday cleared an “interim” COVID-19 relief package that includes billions of dollars for small businesses, hospitals and testing.

The U.S. House is expected to reconvene Thursday to vote on the measure and President Donald Trump tweeted Tuesday that he will sign it.

The bill includes more than $300 billion to replenish the Paycheck Protection Program, which was quickly depleted as firms and some large corporations sought emergency aid. It also includes $60 billion for emergency disaster loans and grants.

Receiving funds was the biggest impediment for small businesses from the first financial package, Everson said.

New qualification restrictions and pressure from the federal government should lessen the number of larger companies applying or qualifying for the latest round of aid, leaving more funds available for small businesses.

But other complications business owners faced during the first round of aid may still linger.

To receive loan forgiveness from the Paycheck Protection Program, owners are required to use 75% of their funds on payroll within eight weeks to receive forgiveness.

But there are flaws with that restriction, particularly since many businesses must remain closed indefinitely, Everson said. Some businesses, such as hair salons, are declining to use the loan because they’re unable to find work for their staff due to ordered closures.

On the other hand, the disaster loan, which offers more flexibility but comes with a 3.75% interest rate, may be available to help more small businesses this round, as long as funds are available.

“We’re hopeful that it’s a little smoother and the true small folks get in on some of this action,” Everson said. “They’re the ones that need it the most.”

Iowa businesses are hopeful they’ll receive aid

Laurie Ray and her husband, Dan, own Mill Creek Restaurant & Lounge in Milford and Webster City Auto Center, a car dealership.

Unlike other businesses, Ray said they received their PPP a week after submitting their application, which she credits to her financial institution being an SBA lender.

Last week, they also received $10,000 in grant money from the EIDL program.

Ray said she went through the restaurant’s savings account to get by this last month, but the grant money will be able to help replenish that.

“The minute it happened, I was on constant calls and webinars,” Ray said. “I probably didn’t sleep. I was constantly putting figures together, numbers together, getting things ready for all the other applications.”

Now, they’re waiting to hear back on an EIDL loan, which she said both businesses need more than the PPP because of its flexibility.

The car dealership, which is a high-cash business, will need the maximum $2 million loan amount that’s provided, Ray said.

Her restaurant can sustain for another month now that it received the $10,000 grant, but she will need business to open again soon, Ray said. The PPP loan would allow her staff to work again, but without tips from the restaurant, she believes they earn more from their unemployment claims.

Ray wants to see more flexibility from the PPP program. Even if she uses only 25% of the loan on payroll, she believes that portion should be forgiven.

“It’s tough decisions to make for employers, especially when that PPP loan is supposed to keep people off unemployment,” Ray said. “I’d rather have some of it be forgivable.”

Who gets state aid?

The lack of transparency regarding who gets priority in receiving small business grants from the Iowa Economic Development Authority is frustrating to Smith.

Iowa Economic Development Authority received 13,745 applications for its Iowa Small Business Relief Grant and awards ranged from $5,000 to $25,000. The department set aside $24 million for the program, which ran out of money early April.

Every application was assessed for economic need and projected revenue loss between March 15 to April 15, according to IEDA’s website. For the first round of funding between April 7-10, priority was given to businesses demonstrating projected revenue losses of 75% or greater and businesses that were the first to close due to COVID-190.

For business owners like Smith and Ray, however, that money ran out before they received any of it.

IEDA plans on awarding more grants from the CARES Act funds if it receives assurances from the U.S. Treasury that funds could be used for business relief purposes, said Kanan Kappelman, spokesperson for IEDA. The department has not announced how much additional money would be made available.

“What upset me is you open this program and only some businesses are going to get it,” Smith said. “How does the state make sure they can keep these businesses open?”

As Smith goes uses up his business’s savings account, which was created to help operations during slower months, he expects he will last only until July 4 if he doesn’t receive any additional aid. At that point, he will be questioning his plans, Smith said.

Ray expects she has another month before the penny pinching starts again. While the loans and grants have been helpful for her restaurant, she said she will need to be able to open again soon.

Everson said most small businesses expect they’ll be able to last until June, which will be the turning point for when permanent closures can be expected across the country.

If that happens, he said the U.S. can expect millions of people to be unemployed.

“At some point we’re going to be at a point of no return where our economy won’t come back and people will be without jobs,” Everson said. “How long can you keep putting a trillion dollars in a program? It seems like a trillion dollars lasts for two weeks. There is no silver bullet answer.”

Linh Ta
Reporter Linh Ta comes to Iowa Capital Dispatch from the Des Moines Register, where she covered trending news, public safety and the suburbs. Most recently, she has covered retail business and followed both national and local trends to provide insight about the issues that matter the most to Iowans. Beyond traditional journalism, Ta has worked as a speech coach with the Des Moines Storytellers Project with the goal of sharing the diverse perspectives of Iowans from all walks of life. She is the 2019 winner of the Young Iowa Journalist Award and the winner of an Iowa Broadcast News Award. Email her at [email protected] or follow her on Twitter @linhmaita.