'There Will Be Some Companies That Don’t Survive’ — W.Va. Small Businesses Navigate COVID-19
At the Rambling Root restaurant in Fairmont, the lights have been dimmed and chairs and tables are stacked in the corner. The bar, usually crowded with locals sipping craft beer, is empty.
Since the state closed all nonessential business due to COVID-19, sales are down by more than 40 percent, said owner D.J. Cassell. He’s had to lay off 10 of his 12 staffers, and a few have already said they won’t be able to come back.
“It sucks, because I am doing everything I can right now to keep the lights on and the doors open here, but if I don’t get some help then — if we close down, I don’t know if we’ll ever open back up,” he said.
The scene is familiar across the state: Thousands of small businesses across West Virginia are struggling to manage the financial fallout from nearly two months of coronavirus-related closures. While the federal government has poured billions of dollars into loan programs run by the Small Business Administration, many small business owners in the Mountain State are still waiting to get the help they need.
“Thinking about the ones that don’t have options is what keep me up at night,” said
Debra Martin, director of the West Virginia Small Business Development Center, a division of the state Development Office. “We’re well aware that the programs that have been created — as generous as they are — are not going to be there for everyone. So there will be some companies that don’t survive.”
The majority of West Virginia employers, public and private sectors combined, are considered small businesses, according to WorkForce West Virginia. Nearly 86 percent of total employers in the state employ fewer than 500 people, as of late 2019.
West Virginia Public Broadcasting spoke with more than a dozen small business owners across the state about their experiences with the federal small business loan programs. While some have had success, others say the experience has been fraught with confusion. Although plans are now in place to begin reopening West Virginia’s economy, it’s unclear how this pandemic will affect businesses long term.
System Overwhelmed, Runs Out of Money
Under the federal CARES Act passed by Congress in March, businesses could apply for the Paycheck Protection Program, which is intended to be used to keep businesses from laying off employees. The first-come, first-served loan provides employers with fewer than 500 employees up to eight weeks of payroll expenses and can be fully forgiven.
The first round of funding for the program rolled out April 2 but ran out within two weeks. During the first round of funding, at least $342 billion in PPP loans were awarded to small business owners across the country, according to the Small Business Administration’s tally as of April 16. In West Virginia, that number was 7,861.
Businesses could also apply for the Economic Injury Disaster Loan (EIDL). The cash advance, up to $10,000, can be used to help with payroll, debts, and bills that would have been covered had the pandemic not occurred. According to the SBA, as of April 24, 53 EIDL loans were approved in West Virginia totalling just over $8 billion.
The West Virginia Small Business Development Center, part of the state Development Office, noted that the number of first-round recipients for both loan programs has likely increased.
Several businesses WVPB spoke with said they had applied for a PPP loan during the first round of funding but did not receive it. Some said they didn’t hear back from the Small Business Administration at all, and weren’t even sure why they weren’t approved or what was the status of their loan application.
“[The] SBA has been almost radio silence since we submitted our [PPP] application,” said Beth Beadway, who owns East Wheeling Clayworks. “It seems like for all of our other small business friends in the area, like either you don't know anybody or like, you know, maybe one or two people somewhere, they got some money, but not very much.”
On April 24 President Donald Trump signed a second relief package that provided another $320 billion for the PPP and an additional $10 for EIDL grants. Martin, from the Development Center said it had a “bumpy” start on Monday.
“The system was overwhelmed and crashed very early on,” she said.
The second round of PPP applications began on April 27. According to the Small Business Administration, within two days, 960,000 loans worth nearly $ 90 billion were approved. And more than half of these loans were filed through smaller sized banks. The agency also offered an eight hour window when only smaller bankers could apply for loans, to increase the ability for more smaller businesses to get their loan application submitted this time around.
There isn’t a clear reason why some businesses did get loans, while others did not. Patrick McCann, who owns Blackwater Outdoor Adventures, in Tucker County, said one of his neighbors, a small business coach, pushed him to get a loan.
Thanks to his neighbor’s advice, he was prepared and was able to apply for a PPP loan just as the SBA began taking applications in early April. He also credited his success to his banker, who was prepared to get his loan application submitted right away.
“They had the credentials that were needed and the know-how,” he said. “And I already had a loan with them. So, it made the application process pretty easy.”
He received his loan acceptance letter just a few days later and is hoping the funds can buoy his tourism-dependent business, which has taken a hit by losing its spring season.
Ken Downey, who owns FD Kitchen and Bath, a remodeling company in Morgantown, said the PPP loan he received is helping him stay in business.
“The minute that the governor shut down the state, 80 percent of our customers just put things on hold,” he said.
Downey and his wife closed their office, but continued to maintain their business with some employees working from home.
“Then it got so slow that we finally decided that it just wasn't profitable to work, at 30, 40 percent capacity,” he said.
They were prepared to shut their doors entirely when their PPP loan came through. It will cover staff salaries. He says the phones have started ringing again.
Even those who got loans said aspects of the process were confusing. Joy Malinowski, who owns the Billy Motel in Davis and the Cooper House Bed & Cocktail in Thomas, applied for an EIDL and was approved for $8,000.
“They never responded, and then I opened up my bank account to pay some bills, and there it was,” she said.
Martin, of the state Small Business Development Center, said, “It’s been non-stop questions.”
“Because you can use the PPP for eight weeks of payroll. At what point do you bring them back? And what do you do at the end of the eight weeks? Right now we don't know the answer to those questions either,” Martin said.
According to the SBA, more than 113,000 businesses in West Virginia are considered small businesses — almost 99 percent of businesses within the state.
The state, and country, have seen unprecedented levels of unemployment claims.
How the pandemic will affect West Virginia in the long term remains an open question.
“There’s a ton of research out there that indicates that small businesses are the best way in the economy to drive change and to drive innovation and dynamism in the economy,” said economist John Deskins, director of West Virginia University's Bureau of Business & Economic Research.
He said small businesses are critical to diversifying an economy long dependent on the coal industry.
“For us to support and encourage new business startups and growth is so important, so key to ultimately finding the right industrial mix to make West Virginia as prosperous and as stable as possible,” he said.
Confusions And Lock Jams
Many business owners told West Virginia Public Broadcasting that they felt confused about the SBA loan application process, and in many cases are still uncertain about the status of their loan application.
“No one seemed to have any solid answers,” said Hillary Harrison, co-owner of Kinship Goods in Charleston, West Virginia, which employs 12 people.
She applied for a PPP loan, but said she never heard anything back from the SBA.
“We spoke with our banker, we spoke with accountants, we spent lots of hours on the phone trying to figure it out and no one seemd to have any information,” she said. “Even the banks didn’t know what the process was going to be.”
Banks did struggle to roll out the PPP program, said Loren Allen, general counsel for the West Virginia Bankers Association, a trade association that represents more than 6,500 financial institutions in the state.
“To be completely frank about it, there was very little known about this program before it actually started,” he said.
Banks had just a few days to ready themselves to accept applications, but Allen said little guidance was provided to the local banks that would be writing these loans, including how the process worked and what documentation was required.
Harrison, of Kinship Goods, also applied for a $10,000 EIDL Advance in early April, but didn’t hear back for weeks whether they approved.
“Then the money ran out, and I don’t know what’s going on,” she told WVPB on April 23. After they submitted the EIDL application, they never received a confirmation number. About a week later, Harrison’s company received both an EIDL advance and an offer for a PPP loan.
Patrick Guthrie, co-owner of Black Sheep Burritos in Huntington and Charleston, got good news and bad news. He also co-founded the VClub, a live-music venue in Huntington owned by his father, and he got a PPP loan for his restaurants but not for the VClub.
“We were first to close and probably [are] gonna be the last to open,” he said. “We’re definitely trying to secure funding for that side. The arts are going to be highly affected by all of this."
Help and Plans To Reopen West Virginia
On April 27, Governor Jim Justice released his plan to reopen the state’s economy. It’s a three-phased approach, but in a matter of weeks most businesses could be up and running, with social distancing measures still in place.
Anna Carrier, who leads the community development program at WVU’s Encova Center for Innovation and Entrepreneurship, said her team is working to help businesses adapt in the weeks and months ahead.
The center is working with more than 50 businesses across the state as they adjust to providing services in a pandemic — helping them figure out how to offer new services at smaller price points or develop an online presence.
“Word of mouth for a local restaurant is huge,” she said. “When a restaurant can't be open for people to come in and try the food, and you're trying to get new customers, then they have to market a whole different way.”
Carrier herself is a small business owner. Her cupcake shop in Morgantown got a PPP loan and has been able to offer curbside service three days a week and online orders.
“When we're all let out of our houses again, there may be some new ways that you've created to generate income,” Carrier said.
But with no vaccine for the coronavirus and so much still unknown about a possible second wave, it’s clear the economy, including West Virginia’s businesses, will look different when we do emerge.
The state SBDC has been holding webinars for small business owners with questions about how to manage their businesses during COVID-19. Martin said they’re working to help businesses reassess their expenses and maintain cash flow until they can reopen.
“We all know that when the economy does reopen, and businesses can open their doors again, it's not going to be business as usual right off the bat,” Martin said. “And so we'll be very much involved in helping businesses figure out how to keep their employees safe, how to keep their customers safe, and how to generate enough income that they can afford to reopen.”
According to the Small Business Administration, within two days of the second round of PPP funding going live, 960,000 loans worth nearly $90 billion were approved. And more than half of these loans were filed through smaller sized banks. The SBA offered an eight-hour window when only smaller bankers could apply for loans, to increase the ability for more smaller businesses to get their loan application submitted this time around.
At the time this article was published, there is not yet information available about how many of these loans have gone to West Virginia businesses.
Back at the Rambling Root restaurant in Fairmont, Cassell said he looked in his account Friday and saw a deposit from the EDIL loan program. It wasn’t the amount he was hoping for, he said, but he will be able to pay some bills.
*** Correction, an earlier version of this story reported that $1.2 million in PPP loans were awarded to small business owners across the country, as of April 16. Actual approved amount of PPP loans was $342 billion, according to the SBA.