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home : archive : archive May 16, 2021

4/15/2021 2:04:00 PM
'There's still a lot of need out there'
A second round of Payroll Protection Plan loans assists small business owners still suffering from the economic slowdown caused by the COVID-19 pandemic

NW GUILFORD - An Oak Ridge family booked a $48,000 vacation to Greece for July, capping a recent surge of business for travel advisor Ginny Mauer, the owner of Cruise Planners in Summerfield.

It's welcome relief for Mauer. For nearly a year, her business suffered financially as the COVID-19 pandemic grounded the travel industry. If not for two federal loans, she said her business wouldn't have survived.

"They were 100% critical," said Mauer, who qualified for a loan last summer and a second one last month through the U.S. Small Business Administration's Payroll Protection Program (PPP). "When no one was traveling, there was no pay coming in."

Last month, President Joe Biden signed legislation extending the deadline for second-round loans from March 31 until May 31 and giving the Small Business Administration (SBA) an additional 30 days to process applications. The U.S. Treasury set aside $284 billion for the loans.

The two rounds of PPP loans offer a direct incentive to small businesses by making their borrowing forgivable if all employees are kept on the payroll for eight weeks after the loan is approved. The SBA requires that 60% of the loan amount be used for payroll, with the remaining amount usable for other expenses such as rent, mortgage interest or utilities.

Some rules changed for the second draw, such as limiting access to loans to companies with no more than 300 employees - down from 500 in the first round - to reach more small business owners.

"There is still a lot of need out there," Brady Young, Bank of Oak Ridge's chief retail banking officer, said in a recent interview. "People don't seem to be as scared, but they are still certainly concerned."

As the second round of PPP lending opened in January, Young said some officials in the banking industry anticipated applications for borrowing would be roughly a third of first-round demand last year.

So far, however, the percentage of second-round borrowing is higher than that. As of this past Tuesday, April 13, Bank of Oak Ridge had approved 416 loans totaling about $30 million. In the first round, it approved 607 loans worth $50.09 million, according to Young.

PS Communications, publisher of the Northwest Observer, experienced a 38% drop in advertising revenue last spring as its advertisers, most of which are small businesses, began feeling the effects of the pandemic on their bottom line.

"Initially we felt only a slight tremor and I thought (very naïvely), 'maybe our local businesses won't be hurt as badly as those in some parts of the country,'" said Patti Stokes, PS Communications' owner. But by May, the company's revenue had plummeted. Stokes said she was initially resistant to take "a government handout," feeling she should either figure out how to make it on her own, or let fate take its course.

As revenue kept dropping, however, she ultimately decided to apply for a PPP loan to keep her staff employed and cover overhead expenses while hopefully riding out the storm.

"Once I made that decision, I was able to breathe a little easier, at least as it related to the temporary security of my business," Stokes said. "I felt like our newspaper was especially needed to connect people during such an uncertain time, and if I didn't try to swim out of the storm, I would not only be bailing on my employees, but letting the communities we serve down."

Once borrowers have used loan proceeds, they can request forgiveness of the loans. At Bank of Oak Ridge, 293 first-round loans, or 48.3 percent of total loans amounting to $22.5 million, have been forgiven, Young said.

PS Communications applied for and received forgiveness for its PPP loan in January.

"Getting that confirmation was a relief, for sure," Stokes said. "The loan, combined with making some changes in our in-print frequency to reduce our overhead, made all the difference in our survival and I'm grateful we're still here."

Fidelity Bank, which operates a branch in Stokesdale, declined an interview request. First Bank and TowneBank, with branches in Greensboro serving northwestern Guilford County, didn't respond to requests for interviews.

Bank of Oak Ridge has stepped up its outreach to minority and other small businesses that may not have qualified for first-round loans or are unfamiliar with the loan program, Young said.

"People don't seem to be as scared as the first time we talked, but they are still certainly concerned," he said, noting that sectors such as restaurants and hospitality are still suffering despite the rebounding economy.

Over the past week, Maurer said she's booked about 35 trips for clients who are willing to resume travel amid the widening distribution of COVID-19 vaccines and the easing of travel restrictions globally.

But demand for travel isn't "back where it was" before the economic shutdown last March, Maurer said.

"Some people are still scared," she said. On the other hand, as some people book cruises and other vacations to destinations such as the Caribbean, Mexico, Costa Rico and Alaska, they're going first class.

"They're ready to go because they haven't spent money on travel in a year," Mauer said. "They don't know what's coming so they want to do it right. I call it 'revenge spending.'"

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