In March, the U.S. experienced a rise in coronavirus cases and a heavy drop in the stock market. As businesses closed, the unemployment rate climbed to 14.7% in April, according to the Bureau of Labor Statistics – the highest in 80 years. Uncertainty was afoot.
On March 19, Gov. Greg Abbott signed an executive order effectively placing many businesses and communities on lockdown. On the same day, 1,500 miles away in Washington, D.C., Congress introduced The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, according to congress.gov.
For small businesses, a notable piece of the legislation was the Paycheck Protection Program, or PPP, which provided businesses forgivable loans so long as the funds went to payroll. The CARES Act became law on March 27, 2020, and a week later PPP loans flowed into the business community according to the Small Business Administration, or SBA, website.
THE BUSINESS
Dr. Chip Mercer is a dentist who owns four dental practices scattered across DFW, including mobile services for nursing homes. Mercer has been a dentist for 18 years. He began his college education as a business major before switching to biology his freshman year. He was also on the baseball team.
“There was a guy on my team and his dad was at all of the games, like Tuesday at noon and Thursday afternoon at 3 o’clock,” Mercer said. “I was like, ‘Man what does your dad do?’” Mercer’s teammate’s dad was a dentist. Mercer said, “I should look into that.” The thought of controlling his schedule, being there for his kids and the small business aspect of the job intrigued Mercer, he said.
Dentistry was something Mercer planned, but COVID-19 was unexpected. First, came the order halting elective procedures. Then, a stricter definition of emergency procedures slowed his practice more. Mercer said, “Those two weeks we were really just medicating people and taking out teeth that were really bad.”
After another tightening of restrictions, Mercer decided to shut down.
In 2007, Mercer’s office burned, and he suffered a total loss. Mercer said, “That was pretty stressful and pretty tough, but this just feels like … you’re at the whims of whatever’s happening in the political game in a lot of ways.”
He questioned the science behind restricting dental practices. Though Mercer said he has made modifications to patient procedures, they already use personal protective equipment every day. Mercer said his practice is not putting a strain on the healthcare system. “That seems pretty crazy to me that we’re going to let people go around with horrible infections which increase the chance of being sick,” he said.
Mercer followed the CARES Act from the beginning, he said. When he heard about the PPP, he saw a little glimmer of hope. “I was like, ‘Ok, we can do this’,” Mercer said. “If they don’t shut us down too long, we can ride through this.” The night before the Congress passed the CARES Act, Mercer stayed up and read the bill. Then he reached out to his bank to start the process.
Mercer was concerned with playing the “calendar game” as he called it. For the loan to be forgivable, the PPP required businesses to not only use 75 percent of the funds for payroll, but to spend the money within eight weeks of receiving the loan. For Mercer, the thought of spending any money on payroll during the shutdown was challenging. He thought about delaying the acceptance of the loan for as long as he could.
Around seven weeks into Mercer’s eight-week period, Congress extended the covered period to 24 weeks and decreased the amount required for payroll to 60 percent.
Mercer’s practice is now operational. He said the process of obtaining the loan was easy due to his relationship with his banker. Mercer said the amount he received as a loan was probably the perfect amount for his business to weather the storm.
THE BANK
The SBA oversaw details of the PPP, but law required businesses to seek approved lenders to receive loans.
Chase Rowe, a senior vice president and lending manager at First National Bank in Southlake, Texas, said, “Regardless of what size bank you were, whether you were Chase or Wells Fargo or a single chartered location in the middle of Nebraska, we all had the same amount of information, which was none.”
Rowe has been in the banking industry for almost 20 years. He started at a Wells Fargo call center in Westlake, Texas, while simultaneously going to school and raising a young family. Around 10 years ago, Rowe made the transition to commercial banking. Three months ago, while still working for AccessBank Texas, Rowe spent most of his time issuing PPP loans.
For some, the PPP was enough. Other businesses needed more relief because the maximum loan amount a company could receive was 2.5 times their average payroll. The forgivable amount only covered payroll and some rent, loan and utility expenses according to the CARES Act.
Added to the burden of issuing loan after loan, Rowe assisted businesses with relief for their current debt. To help his customers’ cash flows, Rowe worked with regulators to grant loan deferrals for up to three months. Rowe said, “Not only did we have issues with the SBA not communicating, we were also waiting for clearance from the regulators to be able to give our clients relief on their loans.” Rowe also helped businesses take advantage of the SBA’s debt relief program which paid six months of qualified loans for a business.
According to The New York Times, many of the nation’s top banks gave preferential treatment to their wealthiest clients. At Rowe’s bank, he said, toward the end of the first round of funding and all throughout the second round, half of the loans went to customers of AccessBank and the other half to new customers. There were a lot of companies whose primary banks had turned them away, Rowe said. “They kind of left their customers out in the cold so we ended up picking up quite a few new relationships that were really good,” he said.
Although Rowe criticized the lack of communication from the SBA, he said he thought the government did a good job by passing the CARES Act. Rowe said, “I think it’s unprecedented, not only the amount of money that they stimulated, but how quickly they did it.”
Rowe said he thinks if more government relief comes, it would logically have to go to consumers.
THE ADMINISTRATION
On March 31, four days after the president signed the CARES Act, the SBA released PPP guidelines for lenders. Throughout April, the SBA and U.S. Treasury Department released a plethora of rules and regulations, according to each of their websites.
Alex Plotkin is the senior business analyst for the Small Business Development Center, or SBDC, for Collin and Rockwall counties. He assisted many businesses navigating the PPP. The SBDC receives funding from the SBA. Plotkin considers the SBDC the advisory arm of the SBA.
Plotkin grew up in Peoria, Illinois, and moved to Texas to go to The University of Texas at Austin. He worked for Wall Street firms in Dallas out of college, but soon switched career paths and bought a day care franchise. Plotkin went on to open five businesses before ultimately landing at the SBDC after a friend said the job was perfect for him. “They want somebody who has owned businesses in the past and who’s good at helping people and willing to share experiences,” Plotkin said.
Plotkin heard about the PPP from the SBA, but for information other than what was publicly available, Plotkin had to take matters into his own hands. Not only did he seek out webinars, he found a source at the SBA office in Dallas willing to help answer questions Plotkin was fielding from his home office.
Plotkin said, “We did everything from just introducing the concept to people when we were consulting with them to walking them through the application.” The toughest part he observed was how difficult it was for businesses to find a bank to facilitate the loan. Plotkin said: “Most small businesses don’t have a loan. They’re just checking accounts and savings accounts, and those are usually with the big banks.” Plotkin said the big banks were not quick to help the smaller customers.
Aside from frustrations business owners expressed, Plotkin said no one lost their temper. He said he was shocked with how appreciative and complimentary people were despite their businesses being on the line. Plotkin said, “I think most of them realized, ‘Hey, look, this is the government giving us money and that doesn’t happen very often.’”