The Toffee Club was closed and gloomy when owner Niki Diamond applied for a second loan through the Paycheck Protection Program in February 2021.
With capacity restrictions still in place, Diamond said it didn’t make sense for her to reopen the English football pub, which depends on sales from large matchday crowds. But her rent, utility and insurance bills were still falling due, and she needed the loan to keep the bar on Southeast Hawthorne Boulevard afloat.
She used the $105,000 she received to hire two cooks for take-out orders and pay her outstanding bills. The federal coronavirus relief program, however, required businesses to spend 60% of their payroll loans to be eligible for full forgiveness.
Diamond expects her loan to be partially forgiven as she spent part of the payroll, but in a few months she will likely have to start repaying the rest – at a time when her business is still recovering from the pandemic.
“It’s just an added financial burden during an already very difficult time,” Diamond said. “We’re super optimistic about spring and summer and we’re excited to have our business starting to pick up again, but the last few months have been really tough. We closed twice over Christmas. So any buffer that was there isn’t more there.
Oregon businesses and nonprofits received nearly 116,000 loans totaling more than $10 billion through the Paycheck Protection Program in 2020 and 2021. More than 87% of those loans were canceled, according to an analysis of program data by the Oregonian/OregonLive.
But about one-eighth of the money, or more than $1.2 billion, that Oregon businesses have received through the program has yet to be forgiven, according to updated Small Business Administration data. for the last time in January. Nationally, about $84 billion still needs to be forgiven, according to the agency.
Many Oregon business owners who received loans last year are still going through the forgiveness process and will eventually see their loans converted to grants. Some business owners have been left in limbo due to issues and delays in the pardon application process. Others who used the money to stay afloat but failed to meet forgiveness requirements are now at the mercy of thousands – with bills already due.
As the program draws to a close, policy experts have begun to debate the extent to which it has helped ease the pandemic recession. A Massachusetts Institute of Technology study found that only between a quarter and a third of the $800 billion allocated to the program went to workers who would have lost their jobs.
The program has provided a vital lifeline to businesses. Even without a discount, businesses that took out the loans got a good deal, with a low 1% interest rate and access to finance at a time when many businesses were in crisis. And most still credit the loans with keeping their business going, even though they are now struggling with repayment.
Lisa Schroeder, the owner of Mother’s Bistro & Bar in downtown Portland, applied for a loan through the Paycheck Protection Program in May 2020, even though her restaurant was closed at the time and she knew that ‘She wouldn’t spend 60% of funding on payroll. She had previously tried the take-out service to keep staff working, but said it was losing around $20,000 a month.
Without an injection of cash, Schroeder said, she would not have been able to meet the bills and rent she owed on two properties – she had taken a risk the previous year by moving her restaurant to a larger location. downtown. .
She hoped the Small Business Administration would eventually ease loan forgiveness requirements, but she thought a low-interest loan would be better than nothing at a time when her business was simply fighting for survival. She eventually received two loans under the program totaling $1.4 million.
“I was ready to roll the dice,” Schroeder said. “Anyway, I was going to be in debt. I was just hoping for the best.
Last summer, that all changed for Schroeder when Mother’s received $4.9 million from the Restaurant Revitalization Fund, another federal pandemic relief program. She used some of the money to start paying off her Paycheck Protection Program loan when the first payments came due last year, and the money gave her the breathing room to give its staff increases – even though foot traffic downtown hasn’t recovered and the restaurant is still only open four days a week.
More than 2,300 restaurants in Oregon received funding through the Restaurant Revitalization Fund, but thousands more weren’t so lucky as the program quickly ran out of funds.
“The only reason I’m able to breathe is because of the Restaurant Revitalization Fund,” Schroeder said. “It was a godsend.”
While some Oregon businesses are beginning to repay their Paycheck Protection Program loans, others are still waiting to hear if theirs will be forgiven.
Carl Balog, medical director of Portland Pain and Spine in Tigard, received two loans under the Paycheck Protection Program totaling more than $173,000. Money has been a lifeline, he says. The clinic’s revenue plummeted 50% in the first six months of the pandemic after Governor Kate Brown ordered health care providers to stop all elective procedures. The loan allowed Balog to continue to pay its staff and keep the clinic open for patients in need of immediate medical attention.
He said he applied for forgiveness of his first loan last summer, but his application is still being processed. He said he had called and emailed Kabbage, the online lender who had granted him the loan, several times seeking an update, but had not heard. Answer.
An analysis of 2020 Paycheck Protection Program loans by the Miami Herald recently found that Kabbage had the worst forgiveness rate of any major lender in the program.
Balog predicts that his loan will eventually be canceled because he followed the requirements set by the Small Business Administration. In the meantime, however, he was left in a state of uncertainty.
While business has picked up since the early days of the pandemic, Balog said the clinic is still recovering from two years of reduced revenue. Progress in practice in the meantime has been held back by having to delay procedures when the delta and omicron variants of COVID-19 caused an increase in cases.
Having to repay federal loans would be another major setback for the company financially.
“I needed those loans as badly as I now need them forgiven,” Balog said.