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COVID-19 small business loan program already broke

photo of studio move

Studio Move yoga and dance studio was unable to get a loan when the program ran out of money. Photo courtesy of Studio Move

Less than two weeks after it launched, the CARES Act’s $350 billion has already been allocated, leaving many businesses— including some in Idaho — out in the cold.

On March 27, President Donald Trump signed the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act, which offered the Paycheck Protection Program to provide loans to small businesses affected by COVID-19 coronavirus.

By April 16, it was gone, after just 13 days in operation.

“Everything was fine, I signed all the paperwork, I created the account, contacted them and they said there was nothing showing I applied,” said Tawnya Halleus, owner of Studio Move, a Boise-based movement and dance studio.

While Congress may appropriate an additional $250 billion for the program, that hasn’t happened yet.

Needs help

photo of tawnya halleus

Tawyna Halleus

Studio Move has been in business for nine years, offering dance and yoga classes to youth and adults. Founded in Halleus’ garage in Hidden Springs, the business moved to the Plantation Shopping Center a year and a half ago.

The business employs 12 to 15 contractors and has about 200 members, for a total of 350 to 400 customer visits a week before the pandemic, she said.

“My overhead is over $4,000 a month,” Halleus said. “I don’t know any small business that can bounce back from that without some kind of help.”

Missing out

The program was criticized when several large chain restaurants, including Ruth’s Chris Steak House, which has a Boise location, received loans from the program — $20 million in Ruth’s Chris case.

Owners of those restaurants pointed out that any restaurant with fewer than 500 employees was eligible, and even large chain restaurants were hit by COVID-19.

“Few, if any restaurants in America employ more than 500 people per location,” wrote Danny Meyer, chairman, and Randy Garutti, CEO, of Shake Shack, a national hamburger chain not yet located in Idaho. “That meant that Shake Shack — with roughly 45 employees per restaurant — could and should apply to protect as many of our employees’ jobs as possible. The immediate drop in business due to the virus had caused the company to face operating losses of over $1.5 million each week.”

Nonetheless, the company announced it will return the $10 million it got from the PPP program because, due to its size, it was able to obtain the funding it needs through equity markets.

Not banks’ fault

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Trent Wright

Idaho financial institutions are hoping Congress will appropriate more money to the program, said Trent Wright, president and CEO of the Idaho Bankers Association, in an email message.

“Nearly $1.85 billion in loans to Idahoans was approved in less than two weeks. That’s unprecedented,” Wright said. “With 30 million small businesses in this country, $350 billion was never going to be enough to cover the needs of the many small businesses that are hurting right now, but it’s a start. That’s why we are calling on Congress to provide additional funding immediately. PPP can’t help every small business, but it should be able to help more.”

Altogether, Idaho received 13,627 PPP loans, covering 70% of the eligible payroll in Idaho, Wright said. The $1.85 billion was also more than the entire Small Business Administration appropriated nationwide in the previous year, he pointed out.

“Idaho lenders exceeded that in 14 days with no guidance until day 5 and subsequent changes to that guidance every few days, an E-Tran system that was not built to stand up to this level of volume and let’s not forget that many lenders are working remotely and from home,” Wright said.

Businesses that didn’t get approved should talk to their banks, Wright said.

“In addition to any assistance the bank might be able to provide directly, there may be other federal programs that could help,” Wright said. “Small businesses may be eligible for the Fed’s Main Street Lending Program. They should also make sure all of their PPP paperwork remains in order in case Congress does provide additional funding.”

About Sharon Fisher