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The sound of opportunity knocking is what every business owner wants to hear.
The sound of that door closing is what she or he dreads.
Across North Carolina, hope has turned to worry for some of the state’s nearly 900,000 small business owners as a key federal program designed to buy them time becomes increasingly inaccessible in a coronavirus-ravaged economy.
It’s a turn of events that has many small businesses scrambling for alternatives, but that has also spurred innovative foundations like Dogwood Health Trust and state and local officials to devise workarounds.
Five days after Diane Parfitt reopened City Center Gallery and Books under Phase 1 of a three-stage plan to restart North Carolina’s economy, the Fayetteville store owner received some disappointing news. Having applied for funding in the initial phase of the Paycheck Protection Program, the U.S. Small Business Administration’s coronavirus emergency fund, Parfitt was asked to remain patient.
But funds ran out.
“When I saw that further money had been approved for a second phase, I just assumed (that) I was still in the queue,” Parfitt said.
“I called my personal banker at Truist, and he told me they were no longer accepting applications and gave me a few suggestions on how to pursue it through other avenues.”
Like Truist, Wells Fargo has also informed its customers that it is no longer accepting applications.
One Wells customer, Leo Davalos, has had better luck than Parfitt, but just barely.
The Chatham County restaurateur opened Rojo Canela in Siler City two years ago, paying for equipment with his credit card and never taking out a loan. Now, with scores of employees at the nearby Mountaire Farms chicken plant having tested positive for COVID-19 and with his dining room closed under stay-at-home orders, Davalos has lost “70 to 80%” of his customers.
With a wife and two kids, a mortgage and two car payments, his second-round PPP distribution of $3,200 is “nothing,” he said.
Davalos told Carolina Public Press that he has “maybe three weeks to a month” before he closes his restaurant for good.
North Carolina holding its own
In sheer numbers, businesses in North Carolina have done reasonably well under the Paycheck Protection Program, which kicked off April 3.
According to 2019 U.S. Census Bureau estimates, North Carolina ranks ninth nationally in population and eighth nationally in the number of new small businesses based on 2018 SBA data. As of April 16, PPP loan approvals in the state in round one ranked 14th nationally with payouts totaling $8 billion, for the same ranking.
On May 8, PPP loan approvals in the state in round two ranked better, with approvals in ninth place and payouts of $4.69 billion, ranking 11th.
$9 million bridge loan from Dogwood
In the original Coronavirus Aid, Relief and Economic Security, or CARES, Act, $60 billion was set aside within the Paycheck Protection Program for minority and other underserved borrowers. Those funds were to be paid out through credit unions, minority deposit institutions or community development financial institutions, or CDFIs. In North Carolina and elsewhere, that meant support for businesses run by women and minorities.
According to 2019 Census Bureau estimates, 22.2% of the state’s population is African American, and 9.6% is Hispanic or Latinx.
“Each of those groups of people has been historically underrepresented — even excluded — from mainstream financial institutions,” said Matt Raker, executive director of Asheville-based Mountain BizWorks, a CDFI that provides small business with lending and learning programs.
Backed by $9 million in bridge funding from Dogwood Health Trust to support outreach to rural, minority- and women-led small businesses and nonprofits seeking PPP loans, Mountain BizWorks swung into action. From April 8 through May 14, when it halted applications, Mountain BizWorks received 1,262 funding requests totaling $50.3 million.
“We’ve been able to provide $9 million so far for 310 SBA PPP loans” or about 25% of all requests, Raker said.
Of that $9 million, 73% was provided to rural businesses and nonprofits, 57% to women-led businesses and 26% to minority-led businesses with some overlap in categories, Raker said.
The funds are 100% forgivable if employee and compensation levels are maintained or restored over an eight-week period after the loan is issued. The funds can also be used to cover mortgage, rent and utility costs.
Any amount not forgiven by the SBA carries a 1% interest rate.
The bridge loan that Mountain BizWorks received from Dogwood helped historically underserved business owners who had faced obstacles in accessing financial support, in part due to brick-and-mortar and connectivity issues.
“We’ve had a 20% decline in the number of physical bank branches in our rural communities,” Raker said. “Those networks weren’t there, those relationships weren’t there.”
A lack of sufficient broadband in rural areas, helpful in shopping for a loan or engaging in bank applications and transactions, continues to reduce access, he said.
“That’s why we really responded and jumped in,” Raker explained. “They were locked out while they were already in crisis mode.”
PPP’s companion program
The Economic Injury Disaster Loan is a second SBA emergency fund. It remains open for applications.
EIDL loans can be used to pay fixed debts, payroll, accounts payable and other bills “that can’t be paid because of the disaster’s impact,” the SBA states.
But manufacturers, restaurants, professional services and other business owners can no longer take advantage of EIDL as it is now open only to agricultural applicants.
That may or may not change as a result of passage by the U.S. House last Friday of a $3 trillion coronavirus stimulus bill. One of its provisions provides for $10 billion in emergency funds to small businesses under EIDL. The Senate has not yet taken up the measure.
The maximum loan for an individual borrower under EIDL, originally set at $2 million, now stands at $150,000.
Shawn Harding, president of the N.C. Farm Bureau, told Carolina Public Press that the lower maximum is helpful because “it’s taken care of a lot of smaller folks.”
Many farmers arrange for capital needs early each year, and many of their needs were met by the time the pandemic hit, Harding said. Within his 580,000-member bureau, he said, “If there’s a problem, we’re going to hear about it. I think our people are being taken care of pretty well.”
But he cautioned that market pricing for various commodities and supply chain issues still cast a cloud over his membership’s well-being.
Help from Raleigh, other foundations
As the Paycheck Protection Program began to fade, state legislators and other private foundations stepped into the breach.
On May 2, the 2020 COVID-19 Recovery Act sailed through the General Assembly and was signed into law by Gov. Roy Cooper.
The law appropriated $1.6 billion to programs and industry sectors and allocated $125 million to the Golden LEAF Foundation for use in its existing N.C. COVID-19 Rapid Recovery Loan Program.
The statewide program, based in Rocky Mount, offers loans of up to $50,000 to businesses affected by the pandemic and, post-legislation, now includes a minimum interest rate for the first six months of the loan and increased time for repayment.
A variety of grant programs around the state are also available. They include Charlotte-Mecklenburg’s COVID-19 Response Fund established by the Foundation for the Carolinas and United Way and the Emergency and Disaster Response Fund established by the Community Foundation of Western North Carolina.
In one downtown, growing optimism
In Hendersonville, one couple say they’re pleased to have navigated the vicissitudes of SBA borrowing successfully in relation to their business.
Chuck and Janna Watson, owners of The French Broad Kitchen & Wine Bar, pushed through the annoyance of being put on hold for hours and found themselves approved for not one but two SBA loans.
“It was pretty stressful trying to find lenders for the PPP loan, but we finally did and got funds through the second round,” Janna Watson said.
“It does allow us to hire back our furloughed employees. We may have to hire new staff, though, as some have decided not to return right away or at all.
“Our priorities are hiring staff, paying our monthly expenses like rent and utilities and getting ready to reopen following all recommended guidelines,” she said.
The Watsons’ reopening may get a big boost as a result of plans in Hendersonville to ban traffic on Main Street during weekends, which will create more social distancing space and allow businesses to set up more of their dining service and retail sales outdoors.
“I think it’s a great idea and I believe it will help everyone on Main Street,” Janna Watson said.