CARES Act Designed to Help Small Businesses

Greenville Business Magazine
April 3, 2020

By Dustin Waters And David Dykes

When Walter Kozlov — owner of PIP Marketing, Signs, and Print in Greenville — first recognized that neighboring businesses might be struggling due to the COVID-19 pandemic, he decided on a way to help out.

Losing much of their regular business with the cancellation of seasonal trade shows and school closings, PIP has adapted by offering signage for businesses looking to inform customers that they remain open. PIP has also begun providing floor graphics for companies with lots of foot traffic to help promote social distancing. Now Kozlov hopes to help other businesses facing trying times.

“I’m in a small strip mall and I have four restaurants around me, and they’re all struggling. They’re good friends of mine. They’re good existing customers of mine,” says Kozlov. “They’ve had to shut down their dine-in options and let go of staff. They are operating on skeleton crews. I like these people. I like eating their food. I like talking to the wait staff, and I just want them to return.”

With restaurants unable to host patrons, Kozlov is offering local eateries 250 free takeout menus to aid in the transition. But the need extends beyond simply ordering a meal. For those who recently lost their jobs due to the current economic crisis, Kozlov will provide 100 copies of their resume. It’s a small step in providing help for those out of work, but at this point every little bit helps.

As many customers and clients isolate in their homes and nonessential businesses are forced to close, many owners are forced to let workers go. An Oxford Economics study estimates that more than 52,000 hotel-supported jobs in South Carolina could disappear.

The Economic Policy Institutes predicts that statewide almost 213,000 workers will lose their jobs by this summer, which accounts for almost 12 percent of South Carolina total private sector employment.

For Metropolis Salon in Columbia, the statewide order to close comes after weeks of maintaining heightened sanitization policies, limited occupancy standards, and a stay-at-home order from the city’s mayor.

Even with restrictions in place citywide, Metropolis owner and stylist Gregory Garrett found the ordinance failed to address the problem of those from neighboring communities conducting business as usual within Columbia. In Garrett’s opinion, the same can be said for Gov. Henry McMaster’s closure of only certain businesses deemed “nonessential.”

“With the ordinances and the mandates not applying to everybody, you’re putting every business owner and every employee between a rock and a hard place. As a business owner, do you decide that these people might not be able to pay their bills or do you put clients and staff possibly in the line of sight that could harm their clients or loved ones?” says Garrett, who questions the piecemeal fashion of the closures. “You’re either going to financially ruin someone or possibly spread a deadly virus. Those are your only choices if you’re allowed to stay open. I don’t understand why it’s not an entire statewide shutdown of everything outside of what people truly need to live.”

If businesses are to survive, owners will likely need to rely on some form of relief funding, which can be accessed in a number of ways under the newly passed CARES Act.

The CARES (Coronavirus Aid, Relief and Economic Security) Act expands the Small Business Administration’s Economic Injury Disaster Loan Program and authorizes $349 billion for the Payroll Protection Program.

“We have thousands of accounts, and we’re doing our best to process everybody and get them help as soon as possible,” says Paul Pickhardt, senior vice president and SBA lending manager in Greenville for Greenwood-based Countybank.

Bank officials will take and process an application, review it for eligibility and fund a PPP loan after the borrower qualifies and signs a note, he says.

“We will take care of our existing Countybank business clients first,” Pickhardt says.

Small businesses, nonprofits, tribal business concerns that meet the SBA’s standard business size definition and veterans organizations organized under 501(c)(19) with fewer than 500 employees are eligible for loans under the program, according to The Washington Post.

Starting April 10, independent contractors and self-employed individuals can apply for loans through existing SBA lenders, according to the U.S. Chamber of Commerce Foundation.

But which option best fits your business?

“If you’re a larger small business with a fair number of employees that you want to keep on your payroll and get reimbursed for that, we typically refer you to the Payroll Protection Program,” says Gregg White, South Carolina district director for the Small Business Administration.

Under the EIDL program, businesses can receive a direct loan from the SBA for up to $2 million at a rate of 3.75 percent for a 30-year term. Applicants can also receive a $10,000 grant to help advance payroll, as well as a low-interest loan for debt services, accounts payable, and lost revenue.

Through the PPP, businesses can apply for a loan of 250 percent of monthly payroll costs up to $10 million. To gain forgiveness on the loan, 75 percent of those funds must go directly to payroll and employees and salary levels must be maintained.

Unfortunately, small-business owners are finding difficulties with the programs aimed to help them through the pandemic.

“We’re at a complete standstill. We have basically applied for every bit of assistance that’s out there. We applied for one through the City of Columbia, which was for $10,000. We got approved today, but they’re only going to give us $5,000 because they ran out of money,” says Garrett. “We are trying to apply for SBA CARES, but the application isn’t available yet. Our big bank that we have a relationship with — which we likely won’t after this — none of them will call us back or answer our questions. We can’t actually get anything approved or moving forward.”

According to Frank Knapp, president and CEO of the SC Small Business Chamber of Commerce and co-chair of Businesses for Responsible Tax Reform, of the 1,800 small businesses surveyed by the BRTR, 73 percent have lost at least half of their revenue during the current crisis. More than a quarter have lost all revenue. Among the respondents to the survey, 66 percent cited specific concerns regarding paying employees.

Unfortunately, Knapp and many others are finding the PPP guidelines for loan forgiveness to be lacking. For example, employers have until June 30 to restore their full-time employee headcount and payroll for any reductions made between February 15 and April 26. But exactly who you rehire isn’t specified.

“It is not clear if you read the sections that were released about loan forgiveness. It talks about payroll for full-time equivalent employees. It even has a line in there about rehiring. I’m not clear what that means,” says Knapp. “Is it rehiring the same person? Is it rehiring someone to be in that same position? I’m not clear about that.”

For business owners struggling to keep afloat, the uncertainty of potentially taking on a new financial burden may prove enough to keep them from seeking federal assistance.

“Until I get an answer to these questions, I’m very reluctant to tell people to do something right away if they want to have it all forgiven,” says Knapp. “There could be a downside here that we don’t understand and it is not clear at all in the guidelines and directions from the SBA.”

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