Retailers outline challenges for Paycheck Protection Program

The program has helped retailers keep workers on the payroll, but the experience can be ‘hectic and stressful’
Operation Open Doors

Resources, tools and templates for safely reopening retail, developed with input from hundreds of retailers. View resources.

When banks began accepting applications for federal Paycheck Protection Program loans in April to help businesses stay afloat during the coronavirus pandemic, Pamela Katrancha was prepared. The owner of the Garden Gazebo garden products shop in Virginia Beach, Va., had worked with her regular bank – one of the largest in the country – in advance, had the paperwork ready to go and “pushed the send button” the same day applications went live.

Nearly a month later, her bank said sorry – Garden Gazebo had missed out on the first round of loans and would have to try again when – and if – there was a second round.

Luckily for Katrancha – and the 10 employees she was trying to keep on the payroll – she had already turned to a small, local bank. And within three days of applying there, her loan was approved and the money was on its way.

“My PPP experience was a little hectic and stressful to be honest,” Katrancha told Rep. Elaine Luria, D-Va., during a virtual tour of Garden Gazebo. “I won’t say I was deliberately pushed aside but my application wasn’t looked at in the first round.”

“We’ve heard great things about local banks,” Luria said. “The smaller the bank or credit union, the more proactive.” Larger banks have been challenged by the volume of applications and layers of approval not required at a small institution, she said.

Challenges and concerns with the Paycheck Protection Program are the top issue retailers have raised as NRF has conducted a series of store tours for members of Congress over the past few weeks. NRF has arranged in-person store tours for years to help retailers build relationships with lawmakers, show how their stores operate and discuss policy issues that affect their businesses. This year, they have taken place as video conference calls because of the pandemic.

All of the retailers who have participated in the tours – using laptops, tablets or smartphones to walk lawmakers around their stores for a look at sanitizing stations, social distancing signage, Plexiglas shields and other protective measures – were ultimately able to get the loans. And all praised the program, saying it played a major role in keeping their employees working and paid.

But even those who got their money without a hitch said the initial eight-week timeframe to use the funding and a requirement that 75 percent of the money be used on wages in order for the loans to be forgiven took away flexibility that would have made the program more useful. And all welcomed legislation enacted this month that has tripled the time to 24 weeks and reduced the amount required to be spent on wages to 60 percent while allowing the rest to be used on other expenses, including rent, overhead and protective equipment such as face masks or changes made to encourage social distancing.

With many stores closed for two months and customers slow to return even now that they have begun to reopen, Katrancha said the eight-week period will run out for many retailers receiving the loans before sales return to normal – if it hasn’t run out already.

“When you were given the money, you were expected to use it by a deadline that wasn’t realistic,” Katrancha said. “It will run out. It will run out before the sales start coming in.”

“It was maddening,” said Ann Cantrell, owner of Annie’s Blue Ribbon General Store, a “gift shop with attitude” in Brooklyn, N.Y. “I think it was probably the most stressful couple of weeks of my life.”

Like Katrancha, Cantrell applied through a major bank but was told she didn’t make the first round and then applied at half a dozen other banks. “I was really panicked that we weren’t going to be able to make it,” she said. “I was desperate.”

Eventually, she received the loan from the bank where she had originally applied, nearly a month afterward. She used the money to bring back her three full-time workers after they had voluntarily taken half-pay for a week before going on unemployment for most of the shutdown. With New York City only in its first phase of reopening, two part-timers are still on furlough.

Cantrell, who is scheduled to host a virtual tour for House Small Business Committee Chairwoman Nydia Velazquez, D-N.Y. on Wednesday, was pleased that the timeframe was extended and more flexibility allowed. She was also happy to hear that Treasury Secretary Steven Mnuchin testified before a Senate committee that the 60 percent requirement might be waived altogether. But with New York rents among the highest in the nation, “If I had known earlier I would have planned a whole different strategy” for how to use the funds, she said.

Marc Sherman, owner of the Stowe Mercantile general store in Vermont, said he used a PPP loan to bring his 15 employees back to work after paying them out of his own pocket for three weeks followed by a month-long furlough. But the eight-week time limit and initial requirement that 75 percent be spent on wages were “unworkable.”

Representative Peter Welch, who took part in a virtual tour of the store, said he chose to co-sponsor the Paycheck Protection Program Flexibility Act – the measure that lengthened the time period and eased the restrictions – in part because of concerns he had heard from Sherman. With little economic activity in the tourist-dependent ski resort, “this is the biggest challenge I’ve had in over 30 years,” Sherman said.

“I think that’s critically important,” Welch, D-Vt. said of the increase in PPP flexibility. “It didn’t work the way it was designed.”

 

Whether it’s the PPPor other measures, Welch said the pandemic “requires an economic plan that matches the reality of the circumstances.”

“It can’t be a one and done deal,” he said. “We’ve got to err on the side of doing too much too soon not too little too late.”

“I hope that there’s going to be one more round of grants or low-interest loans coming,” Sherman told the congressman. “That’s what I really need to move forward. I’m hoping between the state and what you do there in Washington something will kick in to keep our cashflow alive.”

Patti Riordan, owner of Smoke Stack Hobby Shop in Lancaster, Ohio, told Representative Steve Stivers, R-Ohio, that the eight-week limit was an impediment for many businesses: “That clock has started ticking and the need is going to stretch out far longer than eight weeks for some.”

Joe Flynn, president of Flynn’s Tire and Auto Service based in West Middlesex, Pa., has stayed open during the pandemic and had no difficulties obtaining a PPP loan through a local bank. The money allowed him to return his 400 workers at more than 30 locations in Pennsylvania and Ohio to full-time status after a temporary cut to 32 hours a week to avoid furloughs as less driving meant fewer customers coming in for tires or service.

“We really do appreciate the PPP,” Flynn said. “The intent was to keep the guys working, and that’s what we did.”

But he told Representative Tim Ryan, D-Ohio, that not all small businesses had had the same experience. And rules for having the loans forgiven are “a little” unclear, he said.

“People ask how’s the program working,” Ryan said. “I say it depends on who you are. If you got the money and you got it quickly it works. If you didn’t get any money it sucks.”

Related content

Operation Open Doors
 
Guidance on store reopenings including logistics, social distancing and safety issues, and how to bring employees back.
Read more
Through the retail lens: Creative cash flow
 
Consultant Dan Jablons explores the ways retailers are making it work
Read more
Retailers say credit insurance plan could increase liquidity during pandemic downturn
 
NRF says a federal backstop for trade credit insurance could help retailers recovering from the pandemic recession.
Read more