Over the past three months, my team and I have been nearly 100% dedicated to Paycheck Protection Program (PPP) loans. When most individuals were quarantined to their homes, increasing the time spent with loved ones, our families were neglected as we spent thousands of hours adding PPP lenders to our marketplace, building PPP loan application technology from scratch and helping 100,000 small businesses save their American dream.
While I describe the experience as one that’s taken 10 years off my life, it is also one of the most meaningful opportunities of my career. Our team has rallied around the idea of helping millions of small business employees maintain employment through the worst economic crisis of our lifetime. This report released today shows Lendio’s impact on small business through PPP loans to date. For my team, it’s hearing the individual stories of the business owners we are helping that makes the early mornings, late nights and stressful days worth it.
Here are a few of the stories that have stood out to me over the past few months.
‘This Is My Livelihood, What Are We Going to Do?’
Wendy Harris described herself as “a corporate grunt for most of her career,” but seven years ago she finally realized her dream of business ownership when she opened Crafty Beer Shop, a bar and retail shop in Raleigh, N.C.
But like many small businesses across the U.S., the COVID-19 pandemic presented a devastating threat to business owners such as Harris, forcing her to shut Crafty’s doors for months under a government-mandated lockdown. Without foot traffic, businesses such as hers were faced with laying off their staff and not being able to afford their rent.
“It was pretty devastating,” she said. At the time, she thought, “This is my livelihood, what are we going to do?”
Across the country, Tamara Oreshkin was forced to close her more than two-decades-old business for over two months. She owns Piroshky Piroshky, a Russian pastry shop in Seattle’s Pike Place Market.
“I was scared. I’m still scared even now,” she said. “People are not coming back here. Our sales are a third of the usual, even on a good day. We hope for the best, but we don’t know what will happen here.”
A Temporary Lifeline During Catastrophe
Small businesses owners such as Harris and Oreshkin are finding some relief in the federal government’s program that was included in March’s CARES (Coronavirus Aid, Relief, and Economic Security) Act. The loan program was originally intended for business owners to keep employees on payroll, but has since been expanded to cover expenses including rent. As The Wall Street Journal reported, it’s been unclear how far the loan forgiveness would go.
Since the program’s rollout in April, more than $520 billion in loans have been approved to be distributed to over 4.8 million businesses, with the average loan size at around $107,000. The maximum amount businesses can borrow is equal to 2.5 times their average monthly payroll costs. According to the SBA, there were about 30.7 million small businesses in the U.S. in 2019, employing 59.9 million people, almost half of the country’s jobs. That means only about 15% of all U.S. small businesses have received a PPP loan.
But for those businesses that have received a PPP loan, the funds serve as a temporary lifeline during the worst catastrophe in modern times, when other means of funding had already dried up. Had it not been for PPP, many businesses would fail.
“No way would I have been able to pay my people without it,” said Harris, who added the funds helped her to pay for a month of rent. Oreshkin also used the funds from her small loan to cover payroll. As both entrepreneurs are in the hard-hit restaurant sector, they acknowledge that more relief will be needed to keep businesses like theirs afloat.
“We don’t have profits now, we’re just trying to survive,” Oreshkin said. “I just do my job and try to do it the best. I don’t know what solution could help us.”
Room to Perform a Pandemic Pivot
For businesses in other industries, PPP money went further. Los Angeles-based recording studio Sunset Sound had never shut down in its 60-year history of recording musicians including The Doors, Led Zeppelin and Lady Gaga. But when L.A. issued a shutdown order across the city, the studio had to quickly finish all its sessions and close up shop. The owner applied for a PPP loan and finally received approval after weeks of waiting.
“I actually don’t know what we would do without the PPP funds,” said Paul Camarata, president of the company. “Since we were shut down for almost two months, we turned all the equipment off, and it’s not like you can turn it back on and everything works right. I had to bring the whole crew back and get the studios back up and running, which took weeks.”
The funds will be used to pay the staff’s salaries from late April to the end of this month. The studio is now back in business, with social distancing and other health measures in effect.
For Northern California-based Five Points Fitness and L.A.-based Unity Bagels, getting PPP loans provided breathing room to implement pivots to keep the businesses afloat during the pandemic. Five Points had already turned to online classes to keep its membership engaged, with loan money being used to pay its trainers.
“Your big concern as a business is how long can you bleed and survive [until you are] able to open your doors again,” said Five Points co-owner, Bryan LeFebure, who appreciates that he’s able to pay employees’ paychecks during the shutdown.
Even for organizations that didn’t receive a lot of money, having the support of a PPP loan made all the difference in the world.
“Our PPP loan is probably one of the smallest—but it’s not small to us,” said Elaine Eckhart, executive director of the Indianapolis Chamber Orchestra. “It has made a big difference in our ability to keep our organization whole, to be able to pay our staff and musicians and not erode any kind of reserves we have.”
Helping Save the American Dream
For those of us in the small business lending industry, our mission quickly changed from fueling the American dream to saving it. Financial institutions had never experienced this level of demand for funds; most lenders experienced a hundred times more demand than they’re used to, with only a few days to prepare for the process. Still, that doesn’t compare to the untold stress of the nation’s millions of business owners, who clamored for the same pool of money in order to keep their life’s work going.
Through the PPP, we and many of our lending peers have built new relationships with small business customers. As these businesses are the lifeblood of our economy, we have a vested interest in building long-term relationships with them as they embark on the path to recovery. The industry has forged many new partnerships as well, which will be ongoing as we look to provide financial solutions for the short and long term. Our technology is helping financial institutions with the loan forgiveness process, which will be just as painstaking and complicated for a lot of institutions as the funding process has been.
Quick access to capital will always be vital, not just during times of downturn. We’re also committed to further supporting minority- and women-owned businesses. Our mission is to make capital accessible to as many small business owners as possible. To hear the stories of some of the business owners who are receiving vital funds from PPP is encouraging, and a hopeful sign of America’s ability to rebuild and recover.