Money is running out for Iowa businesses that received paycheck protection loans

The storefront of Court Avenue Brewing Company in downtown Des Moines. (Photo by Linh Ta/Iowa Capital Dispatch)

When the federal government offered businesses the first round of the Paycheck Protection Program back in March, Des Moines restaurateur Scott Carlson immediately applied for the aid, looking for a lifeboat as the COVID-19 pandemic shut down his industry.

Now, however, Carlson and other small business owners in Iowa have found themselves running out of their first round of aid. Unlike later borrowers, those who initially received funds were under stricter regulations. The program required them to use 75% of the loan within eight weeks to gain forgiveness.

While Congress later passed a measure relaxing its rules, for some of those early borrowers, it was already too late.

“Everyone who voted on that COVID program thought we’d be out of it in eight weeks,” Carlson said. “We thought we’d be done by after Easter.”

Congressional support from Democrats and Republicans

Iowa’s congressional members from both sides of the aisle have said they’re open to supporting a bill that would dedicate some of the remaining PPP funds to the early borrowers who have exhausted their funds.

Rep. Cindy Axne, D-3rd District, said she wants Congress to quickly pass a bill that will support these businesses that are struggling. The challenge, however, is that the Senate is in recess until July 4.

Head shot of Cindy Axne
U.S. Rep. Cindy Axne is a Democrat who represents Iowa’s 3rd Congressional District.

Passing a bill providing more aid to small business owners may not happen until mid-to-late July.

“We need to force the Senate’s hands. We can’t keep waiting that long,” Axne said during a roundtable in mid-June. “We’ve got the money in there. It’s doing no good just sitting in there.”

Sen. Joni Ernst, R-Iowa, sits on the Senate Small Business Committee and also supports providing more aid for initial borrowers.

“As a member of the Senate Small Business Committee and a champion of the Paycheck Protection Program (PPP), Senator Ernst supports allowing Iowa’s distressed businesses to receive a second PPP loan,” said Ben Watson, a spokesman for Ernst.

Congress is expected to pass its next round of PPP by the end of July, said Matt Everson, director of the National Federation of Independent Business in Iowa. About $134 billion remains available for businesses to use. Iowa-based businesses have received 57,638 loans, according to the Small Business Administration.

Sen. Joni Ernst speaks during a video her office produced about her tele-town hall on May 20, 2020.

As laws and new policies rapidly change surrounding PPP, it’s difficult for some small business owners to keep up as they try to sustain their operations and keep their staff employed, Everson said.

NFIB is requesting Congress dedicate some of the remaining PPP funds to the hardest-hit industries, like retail, restaurants and bars.

“I still think a lot of our businesses are struggling and are wanting to bring everyone back,” Everson said.

On June 3, Congress passed an act granting more flexibility for borrowers, lowering the payroll requirements to 60% and allowing borrowers to use their loans through December 2020.

These are all positive changes, said Jessica Dunker, president of the Iowa Restaurant Association. However, initial PPP borrowers ended up using their loans to pay their employees, despite the occupancy and dining restrictions in April and May.

Those loans ended up replacing unemployment payments that staff could have been receiving, Dunker.

“The rule followers, that was to their detriment,” Dunker said.

Carlson, who owns Court Avenue Brewing Company, Americana, Gilroy’s and the Iowa Craft Beer Tent said he’s already run out of two loans.

He’s seen an improvement in sales since restrictions have lifted in Iowa, but they pale in comparison to last year. This year’s sales are only 35% of 2019’s numbers, Carlson said.

Rising food prices are also adding an extra burden. Americana, known for its weekly $7 burger nights, can no longer offer that price because of beef costs. Before COVID-19, a beef patty cost him $1.08. Today, it’s $3.20.

“Now it’s a $9 burger and we’re still not making the money,” Carlson said.

He hopes Congress is able to pass aid soon to give businesses a greater chance of survival. If a large number of small businesses close down at the same time, he fears the economic distress it will cause in the market. But with some aid, closures may be staggered, giving other entrepreneurs time to take over empty storefronts.

“You’ve got all sorts of people in your life. Do you take more risk or finally say, ‘We need to bow out?’ Will there be other industry to work for at that point?” Carlson said. “That’s the stuff that keeps me up at night. It’s not the things, it’s the people.”

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.