What’s next?

The Paycheck Protection Program generated considerable controversy after its March rollout with the COVID-19 pandemic taking a massive toll on the national economy. This new form of federal aid for businesses called for forgivable loans, capped at $10 million, to soften the financial blow of state-mandated business closures meant to suppress the spread of the virus.

For the loans to be forgiven, borrowers had to spend the money on qualified expenses, such as payroll, rent, utilities and mortgages. Media reports recounted difficulties businesses encountered in getting the loans. In fact, an estimated 86% of New Jersey businesses had not received federal assistance through the PPP, as of a June report by Focus New Jersey, the nonprofit research arm of the New Jersey Business & Industry Association.

But the loans did offer a reprieve to businesses that managed to secure them. Now, a stalemate in Washington on extending the Coronavirus Aid, relief and Economic Security Act – the legislation creating the PPP loans – means the program’s future is uncertain.

Kika DuBose Wise received a PPP loan for her assisted stretching business, which has five locations throughout New Jersey. She owns two of them and franchises the rest.

As her business requires that she touch people, thus preventing any opportunity for distancing, she was shut down until mid-July. When she was allowed to reopen, she brought her seven staffers back to rebuild their schedule of appointments.

“Because I’m in a service business and my payroll expenses are one of my highest expenses, when I brought back all of the staff, that’s where most of the money went to. It was great because I got to bring them back, generate business, but then it started to run out because now we’re back in the swing of things,” Wise said. “It was helpful to regenerate the schedule for the coaches, but now we’re at the point where we’re like ‘is there going to be any additional help to put a heartbeat back into the business?’”

But, she said, her studios are surprisingly busy. Her coaches see clients one-on-one, and to lure people back, she went back to one of the tactics she used when she started her business a decade ago: Everyone who wanted to try assisted stretching – think yoga, but where the teacher moves your body for you – could come in for a free session.

Soon, her books began to fill up.

“[Being one-on-one] helped us be really safe and make people feel confident. That’s what we’re really trying to do and that’s how we’ve been able to grow our business during the pandemic. Most of the people we have are new—we do have a small group of older clients who are still kind of waiting it out, but we have so many new clients to make up for that,” Wise said.

Without the PPP, she wouldn’t be able to say as much. “It was extremely helpful because it helped me pay the employees initially for the work that they did without me having to generate money to pay them. I was instantly able to put them on the schedule to just open up again without having to figure out where to get more money, from god knows where, to bring them back onto payroll,” she said.

Little City Books in Hoboken received its PPP funding on May 5, and though owners Donna Garban and Kate Jacobs received other financial help as well, PPP came just in time.

“It was the very first thing that came through that was very helpful to us,” Garban said. “We had stopped business but still had a fair amount of bills due, and to get it going again, we needed to hire people back.”

Sales are still down quite a bit, Garban explained. People have left town for less dense, less expensive areas. But sales have shifted, too, because there’s no more 6 o’clock rush from the train station each night.

In a way, people’s more flexible schedules have allowed Little City to recoup some sales earlier in the day as the shop closes earlier to make time for restocking, which the staff can no longer do with customers in the store.

“The PPP was critical when we were completely closed. Our sales were depressed because they were online sales only. With the PPP, we could just hire people back without worrying and use our staff to generate sales. We used it right away to get us ready for curbside delivery and ultimately open on June 15,” she said.

Forgiveness was a critical component for small businesses who took PPP loans. Garban and Jacobs at Little City used all of their PPP aid by the end of the initial eight-week span that the forgiveness applied to, just to make sure they didn’t run over.

As Wise prepared to do her forgiveness paperwork, she worried about her fellow small business owners missing out on forgiveness if they didn’t turn in their application by the time the bell rang. “There are so many business owners that are completely clueless that they have to return their money by a certain date – so I think so many business owners will be left out of the forgiveness loop, because they’re so focused on surviving. It’s like a second job filling out all these applications,” Wise said. “I’m filling mine out today.”

Earlier in the month, the U.S. Small Business Administration, which oversees the program, said it would offer forgiveness to many loans under $50,000 with just a single-page document – a move that could take the burden off hard-hit small businesses across the nation.

“We are committed to making the PPP forgiveness process as simple as possible while also protecting against fraud and misuse of funds,” U.S. Treasury Secretary Steven Mnuchin said in an Oct. 8 statement. “We continue to favor additional legislation to further simplify the forgiveness process.”

The SBA estimated in May that the average loan size was roughly $73,000. Given that any business that received a loan under $150,000 did not have its name and information made public, the vast majority of loan recipients are not known. For New Jersey, the Trump administration published the names of 22,000 companies that received PPP relief, ultimately withholding another 126,000 names.

Matthew Coleman, a spokesperson for the SBA, pointed out that forgiveness applications filed for loans of over $2 million are automatically audited, to ensure those recipients actually needed the money.

Those audits follow revelations in the spring that well-financed, publicly traded businesses that did not need the money were able to receive lucrative PPP loans. Examples include the Los Angeles Lakers, who were pressured to return a $4.4 million loan; the Kura Sushi chain, which returned a $6 million loan; Shake Shack, which returned $10 million; and Ruth’s Chris Steakhouse, which returned its $20 million loan.

“Before we forgive these loans, we’ll check every single one over $2 million,” Mnuchin said in April. “So anybody that took the money that shouldn’t have taken the money, one it won’t be forgiven, and two, they may be subject to criminal liability, which is a big deal.”

But for the much smaller businesses, over 100,000 loan forgiveness applications had been submitted to the SBA, Coleman said.

At Delta’s Restaurant, owner Joshua Suggs received his PPP in April and used it to pay employees from when he opened on July 7 to when he ran out on Oct. 4. Originally, 12 people came back to work; and now, 34 are on payroll at Delta’s.

To get his workers back, Suggs had to compete with the additional $600 those on unemployment were receiving, as well as fears of catching COVID-19 while interfacing with the public. Employees who agreed to work three shifts per week through October got $400 COVID-19 bonuses; and he’s been giving bartenders $100 bonuses each week to make up for the fact that no one can sit at their barstools. For bussers who usually make $5.50 plus tips, Suggs has been paying them $13 an hour.

“But with the amount of pay that people earned, I think my payroll the first week was $7,000 and I made $15,000. If we had to do the mortgage and everything, we would’ve lost $6,000 or $7,000,” Suggs who owns the building Delta’s said. “To get the ball rolling again is very difficult. If you had a bunch of debt before this, that’s why you’re going to see a lot of closures.”

All in all, the PPP ended up working out well, Suggs said, “assuming it’s forgiven.”

The window to apply for PPP money closed at the start of August, and needs Congressional authorization to continue. President Donald Trump and his administration have gone back and forth with saying that a deal could not be reached before the Nov. 3 presidential election date on extending the CARES Act.

At the Oct. 14 Milken Institute Global Conference, Mnuchin said that “at this point getting something done before the election and executing on that would be difficult.”

That contention drew scorn from New Jersey’s Democratic congressional representatives, who criticized the U.S. Senate for moving ahead with confirmation hearings for U.S Supreme Court nominee Amy Coney Barrett but not a CARES Act extension.

“If we could take the time to consider a Supreme Court justice, we can take the time to pass a relief package that will help millions of Americans across the country,” U.S. Sen Bob Menendez, one of two New Jersey Democratic senators, said at a news conference in Hillsborough on Oct. 13.