As PPP loan program ends, Tampa Bay small businesses’ haul nears $10 billion - Tampa Bay Times

As PPP loan program ends, Tampa Bay small businesses’ haul nears $10 billion - Tampa Bay Times


As PPP loan program ends, Tampa Bay small businesses’ haul nears $10 billion - Tampa Bay Times

Posted: 08 Jun 2021 04:28 AM PDT

An early business casualty of the coronavirus pandemic was one that hit Jill Whelan, owner of A Special Touch — Cakes by Carolynn in St. Petersburg, particularly hard: The wedding industry.

"The whole cake industry," she said. "Birthdays, everything."

Whelan's business got two relief loans through the U.S. Small Business Administration's Paycheck Protection Program, one for $20,377 last year, and another for $20,000 in January. She used them to pay bills and salaries for her staff of three.

"We closed down for a month," she said. "But those PPP loans are the things that saved us. Because if I didn't have that, we would have had to shut our doors."

Whelan is hardly alone. Since opening in the spring of 2020, the Paycheck Protection Program has shepherded about $800 billion in largely forgivable relief loans to 8.5 million small businesses and nonprofits.

The program officially closed May 31. And while the totals are incomplete as banks process the final loans, it's clear that the aid to Florida's economy was immense.

Over 14 months, banks approved at least $51.2 billion in loans to more than 1 million Sunshine State businesses, according to data compiled by the Small Business Administration through June 1.

In Tampa Bay, at least 161,000 loans worth more than $9.8 billion went to businesses in the eight counties around Tampa Bay — Hillsborough, Pinellas, Pasco, Polk, Sarasota, Manatee, Hernando and Citrus — according to an analysis of ZIP code-level data.

Much of the economy has rebounded since the start of the pandemic, and in many cases businesses are doing even better. Without the Paycheck Protection Program, which covered expenses such as payroll, rent and utilities, that may not have been the case.

"I don't think the recovery would have happened without those monies," said Michael Kilpatrick, Tampa Bay market president for Centennial Bank, which processed thousands of relief loans. "It gave everybody the impression that the government is willing to stand behind your business, which is the biggest thing."

While businesses of all sizes benefited, from public corporations to tiny mom-and-pops, bigger companies typically got the most.

More than 92 percent of all Tampa Bay loans were for less than $150,000, indicating the vast number of smaller businesses that got at least some emergency funding. But those businesses got only about 39 percent of the total loan pie.

Larger businesses that asked for more money received 61 percent of Florida Paycheck Protection Program funding, including close to 50 that were approved for between $5 million and $10 million, the most any business could get. That includes Times Holding Company, which operates the Tampa Bay Times and related publications, and received $8.5 million.

At least 25 Florida companies got approved for the maximum loan amount of $10 million in 2020, including Red Lobster, Tijuana Flats, Silver Airways and Stein Mart, which filed for bankruptcy in August.

Five Tampa Bay businesses were approved for loans worth $10 million: JTS Enterprises of Tampa, which operates a chain of local McDonald's franchises; Florida Medical Clinic in Zephyrhills; Lutheran Services Florida in Tampa; Truecore Behavioral Solutions in Tampa; and Citrus World in Lake Wales.

Not every company kept all the money for which it was approved. Some repaid the loans, even though most companies ultimately were not required to. In the case of Lutheran Services Florida, a nonprofit benefitting underserved children and families, the company has used about half its loan for operations and staffing in child welfare and pre-kindergarten programs, said spokesperson Terri Durdaller. The company's revenue stream should return to pre-pandemic levels in July, she said, and it plans to return any unused funds.

A spokesperson for Citrus World said the company's loan helped the company retain employees even as its food service arm lost 90 percent of its revenue. Calls and emails to JTS Enterprises, Florida Medical Clinic and Truecore Behavioral Solutions were not returned.

Related: These public Tampa Bay companies got millions in small business PPP loans

The government's "second draw" loans, which became available in January and were capped at $2 million, allowed thousands of businesses to nearly double their initial loan haul from 2020 — including some large ones.

The Florida Aquarium got $1.98 million last year and the same amount this year, while the Clearwater Marine Aquarium got $1.62 million last year and just slightly less in 2021. The Saddlebrook Resort in Wesley Chapel got $2.95 million in 2020 and another $2 million in 2021. ZooTampa at Lowry Park got $2.17 million last year and $2 million this year. The David A. Straz Jr. Center for the Performing Arts got $2.82 million, then $1.87 million.

Some companies' second-draw hauls will be factored into their subsequent requests for targeted grants that have not yet been disbursed, such as the Restaurant Revitalization Fund and Shuttered Venue Operator Grants. Companies that got second-draw loans would see that money deducted from their grant allocations.

Bookkeeping measures allowed some corporate umbrella companies to get more.

Last summer, for example, a collection of 10 hotels headquartered at the same Tampa address — all partly owned by Tampa entrepreneur and philanthropist Dr. Kiran Patel — received $19.8 million. On the second draw, those same hotels were approved for another $10.8 million. (Patel is part of an investment group that has that loaned $15 million to the Times Publishing Company.)

Law firm Morgan and Morgan, headquartered in Orlando, got nine loans worth $18.1 million for its offices around the Southeast, led by $5.5 million for its Tampa office.

A Tampa-based collection of 15 restaurants and businesses tied to Outback Steakhouse co-founders Bob Basham and Chris Sullivan received $10.2 million last year, and $4.9 million this year. And eight corporations operating under the umbrella of the Columbia Restaurant, including affiliate eateries Goody Goody and Ulele, got nearly $6 million in loans last year, and another $3.9 million this year.

Related: 10 loans, one address: Tampa philanthropist's hotels got millions in federal aid

For smaller businesses, the impact of the loans depended in part on how much they were eligible to get.

"Everyone that I've talked to, they've gone after every single thing they could get," said Lynne Conlan, executive director of the South Hillsborough Chamber of Commerce..

It also included the South Hillsborough Chamber itself. Not-for-profits like chambers of commerce were not initially eligible for last year's loans. That hurt their bottom line, Conlan said, as some businesses closed and others could no longer afford membership.

In February, the South Hillsborough Chamber got $17,176 — enough to offset some of its losses from canceled luncheons and expos.

"We only have two employees, but we used it for salaries, bills and rent, that kind of thing," Conlan said. "That has helped us. We never did shut down, the whole time."

Related: Clearwater doctors got a PPP loan, then dissolved practice — but only on paper

Ana Stout, 38, said her loans helped slightly at her Westchase nail salon, Amour Nails and Spa. She got $6,260 in 2020 and $6,771 this year. But with her rent at about $3,700 per month, and her two salaried employees making about $2,000 per month, the money didn't go far.

"Six grand is nothing, to be honest with you," she said. "But something's better than nothing."

One long-term effect of the loan program may end up having nothing to do with the money itself. The application and forgiveness processes may have changed the way small businesses thought about their finances and business models, said Centennial Bank's Kilpatrick. And it opened up new channels of communication between small businesses, their banks and the federal government.

"The positive thing we take from all of this mess is that business owners now are looking at their business from different angles," Kilpatrick said. "If you already get through that, you can get through anything."

Related: As COVID-19 relief bill nears, businesses sit tight on PPP loan forgiveness

That's how it felt at A Special Touch — Cakes by Carolynn. Whelan tightened her budget and turned to making cupcakes instead of wedding cakes. Customers bought $300 gift cards to help get the business through each month.

Between that and her two loans, the company is doing well enough that Whelan decided not to apply for other federal grants now available to businesses like hers. She no longer thinks she needs them.

"lf the weddings that were supposed to be last year are coming this year, plus all the weddings that were planned for this year are coming," she said. "I just thank God we made it through."

Four common business misconceptions - The Standard

Posted: 08 Jun 2021 02:00 PM PDT

[unable to retrieve full-text content]Four common business misconceptions  The Standard

How cities, states, and tribes can boost entrepreneurship via the American Rescue Plan - Brookings Institution

Posted: 19 May 2021 12:00 AM PDT

The COVID-19 crisis has put thousands of small businesses, from high-growth startups to Main Street employers, out of business. Importantly, the economic impacts of COVID-19 have not been equal. Minority-owned businesses and very small businesses are disproportionately concentrated in the industries most heavily impacted by the COVID-19 crisis such as restaurants, retail stores, and personal services. As a result, encouraging entrepreneurship, making it more equitable, and improving access to the financial resources needed to start and maintain a business must be a priority for policymakers as the economy recovers.

While a significant amount of attention has rightfully gone to the $350 billion in flexible funding provided to states, counties, cities, and tribes in the $1.9 trillion American Rescue Plan (ARP), this historic bill also contains an important separate investment aimed at supporting entrepreneurs and small businesses. The ARP's reauthorization and expansion of the State Small Business Credit Initiative (SSBCI) can not only bolster business creation, but also rectify many of the longstanding entrepreneurship inequalities that exist by race, gender, and place in the United States. SSBCI provides $10 billion to states and tribal governments, providing them flexibility to design a portfolio of small business financing programs that meets the unique needs of local entrepreneurs and considers the conditions of local capital markets. Different than prior federal small business policies focused on relief, such as the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) program, SSBCI will enhance recovery by providing states and tribes more flexible, patient capital to spur an inclusive entrepreneurship-fueled rebound.

SSBCI incentivizes capital access across the small business spectrum

Originally established by the Small Business Jobs Act of 2010 in the wake of the Great Recession, SSBCI provided $1.5 billion in federal funds at that time to states to restore small business lending and investing activity by sharing in financial risk. Recognizing that small businesses are a vital part of the U.S. economy and that different types of small businesses have different financing needs, SSBCI supported a range of eligible state programs: capital access, collateral support, loan participation and loan guarantee programs for credit support, and state-sponsored venture capital programs for equity support.

SSBCI-supported lending programs work with mission lenders such as community development finance institutions (CDFIs) and community banks to address the systemic market needs of socially and economically disadvantaged individuals. Venture capital (VC) programs work with non-profit venture development organizations (VDOs) and private investors to mitigate capital access challenges for high-growth startups resulting from the extreme geographic concentration of the venture capital industry.

Fig1

A 2016 evaluation of SSBCI prepared by the Center for Regional Economic Competitiveness and Cromwell Schmisseur LLC (note: Eric Cromwell and Dan Schmisseur are the founders and owners of Cromwell Schmisseur LLC) found that through 2015, states expended $1.04 billion of the available $1.5 billion in funding, thereby leveraging nearly $8.4 billion in new lending and investing. Importantly, the evaluation found that SSBCI expanded entrepreneur and small business financing programs that addressed local objectives, and also found that Treasury's role providing technical assistance helped build capacity for business financing at the state level. In other words, a well-executed SSBCI program has the potential to jump-start entrepreneurship in communities across the U.S. while addressing local economic needs.

How states, territories, tribes, and cities can take advantage of this once-in-a-generation opportunity

ARP reauthorizes SSBCI with a significantly larger $10 billion appropriation. The program allocates $6.5 billion to states by formula, disbursed in three separate payments, with a minimum total allocation of $56.2 million for each state. From there, the program will allocate an additional $1.5 billion to states to support small businesses owned and controlled by disadvantaged individuals, a set-aside that didn't exist in the original SSBCI program. States that demonstrate "robust support" (as defined by the Secretary of the Treasury) for disadvantaged individuals will then be eligible for an incentive program that will provide a total of $1 billion in additional support to qualifying states by increasing the second-third and last-third funding allocations.

In parallel, the program has dedicated $500 million to help Native American tribal governments support entrepreneurship and business development through their own lending and venture capital programs. Finally, the program provides $500 million for technical assistance to support very small businesses and businesses owned and controlled by disadvantaged individuals. States and tribes have until September 30, 2030 to distribute all of their SSBCI money to entrepreneurs and small businesses (though the funding is distributed in thirds and states must allocate 80% of their first two distributions within three years of receiving them). This longer time horizon distinguishes SSBCI from other sources of state and local funding in ARP, which must be spent within two years.

The SSBCI is a federal-state partnership (or in the case of tribes, a federal-tribal partnership) where a state agency is designated to participate in the program and implement approved program strategies. States signaled their intent to participate in the program in May, while tribes are being given until July 30, 2021 to decide whether to participate. State officials are now turning their attention to program design decisions in preparation for the release of the application forms in June, with the state application deadline set as December 11, 2021.

To make the most of the unique opportunity provided by SSBCI to improve capital accessibility and address market inequalities, we outline three considerations for state and tribal decisionmakers:

  1. Establish a team and draw on expertise from past SSBCI officials

State administrative leaders should establish a team that has responsibility for reviewing information, engaging with diverse stakeholders, developing the framework for a conceptual program portfolio, and making recommendations to state policymakers for SSBCI funding allocation decisions. State teams should be headed by senior officials such as the state secretary of commerce, with support from the governor. States should aim to hire program managers with commercial lending or investment experience, as well as employ a group of dedicated compliance officers. Wherever possible, states should draw on officials, employees, and contractors who were involved in the original SSBCI program and reach out to peers in other states for mutual information sharing. The objective should be to lead a collaborative and transparent planning process for assessing small business needs, engaging partner organizations, and marketing programs to private sector participants.

On the lending side, large financial institutions, community banks, credit unions, and community development financial institutions (CDFIs) can provide a realistic assessment of demand for capital across the full small business spectrum. Entrepreneurship support organizations, chambers of commerce, and community-based small business groups can organize and translate feedback from small business owners themselves. To ensure planning processes are inclusive, state officials should prioritize outreach to minority-serving small business organizations, and use their technical assistance resources to compensate them for their advice and planning support.

On the venture capital side, most states have existing venture development organizations with either statewide or regional service areas. These economic development partners were integral to the success of the original SSBCI program in both lending and venture capital programs and should be included in the design and implementation decisions for the relaunched initiative. Larger states with population and economic clusters spread across multiple areas are best served by strategies that build local investment capacity, like the Ben Franklin Technology Partners in Pennsylvania or JumpStart, Rev1 Ventures, and CincyTech in Ohio. In smaller or less populated states, engaging with venture development organizations with a statewide mandate and service area is a smart strategy. For example, state-supported entities such as i2E in Oklahoma, TEDCO in Maryland, and Connecticut Innovations have a proven track record of investing in and providing technical assistance to entrepreneurs statewide. Again, states should ensure this outreach is inclusive of Black- and brown-led venture funds, accelerators, and incubators in addition to those entities that led SSBCI strategies a decade ago.

  1. Split funding between lending and VC based on state (or tribal) capacity and business needs

In the prior iteration of the program, most states allocated funds to both lending and investment programs, but some allocated all of their SSBCI funding to either lending programs (19 states) or venture capital programs (5 states). With the significant increase in funding provided to each state, we expect states to allocate funds to both lending and investment programs, and in doing so balance the need to move significant amounts of capital quickly, inclusively, and via channels that satisfy Treasury's expectations that each $1 of state-funded support should leverage $10 of private capital.

Fig2

A reasonable starting point for states might be to consider an equal capital allocation split between lending and investment programs, with adjustments made during the collaborative review and planning process. For states that implemented only one type of program during SSBCI, it will be important to carefully review program experiments from other states and access credible information and technical assistance.

During the program design and application phase of SSBCI, there are two important types of capacity to analyze and understand. The first is administrative capacity, where the planning team evaluates existing small business financing programs and personnel—including programs funded by SSBCI between 2010 and 2017—to better understand where the state does and does not have program management expertise. For this analysis, state agencies, state supported quasi-governmental entities, and other partner organizations like CDFIs should be recognized for their contributions and program management capabilities related to statewide economic development.

The second type is investment capacity, where the supply and demand of both credit and equity-based investment in the state should be evaluated before program design decisions are made. States should conduct a detailed and candid market analysis that includes reviewing data from independent national sources, gathering information from regional venture development and support organizations, and inviting private lenders and investors to comment on financing gaps and proposed solutions. Again, building a diverse advisory process will ensure that programs reflect on-the-ground market realities.

  1. Develop more lender and entrepreneur capacity, with a focus on disadvantaged groups

In the original SSBCI program, states varied widely in how quickly they were able to deploy capital. In the reauthorized program, getting money to small business efficiently and effectively will be critical to accelerating an inclusive national economic recovery. As mentioned previously, Treasury is providing funding in three tranches, and states must transfer or obligate at least 80% of the first tranche of transferred funding to unlock the subsequent funding transfer.

However, it will not be enough for states to simply rely on their existing networks of lenders, investors, and entrepreneurs. Historically, both lenders and recipients of funding, particularly venture capital funding, have been overwhelmingly white and male. And when minority groups are involved with entrepreneurship, they tend to be disproportionally concentrated in so-called 'Main Street entrepreneurship', and less involved with higher growth tech and advanced sector firms. As a result, absent concerted state-level efforts, this new round of funding could inadvertently reinforce existing structural inequalities in the U.S. entrepreneurial system rather than begin to ameliorate them.

As noted above, ARP sets aside $2.5 billion in SSBCI funding for disadvantaged communities, and $500 million for tribes. If managed correctly, this funding has the potential to begin changing the biased nature of capital access in the United States. However, funding alone will not be sufficient. Federal, state, and tribal leaders will need to develop new lending and entrepreneurial support capacity for both high-growth and Main Street small businesses in order to take full advantage.

One recommendation is for Treasury to be creative and flexible with how the department allocates the $500 million in SSBCI technical assistance funding. For example, there would be great value in allowing technical assistance funding to help states and tribes develop new lending and investment capacity. On the lending side, Treasury could direct this funding in ways that help stand up new CDFIs and community banks. On the equity investment side, technical assistance funding could be used to provide legal, accounting and financial advisory services to very small investment management businesses so that they can apply to states to manage SSBCI funds, with the goal of spurring more women- and minority-led investment funds. Across the board, Treasury should encourage states to use technical assistance dollars to bolster funding into small business development center networks and other entrepreneur development resources that provide legal, accounting, and financial advisory services to very small businesses.

For their part, states and tribes could leverage a portion of the $350 billion in flexible funding contained in the ARP to put toward small business development centers, incubators and accelerators, and other entrepreneurial support. Indeed, recent guidance by Treasury makes it clear that "technical assistance, counseling, or other services to assist with business planning needs" are an acceptable use of that funding if put toward "businesses with less capacity to weather financial hardship, such as the smallest businesses, those with less access to credit, or those serving disadvantaged communities"—the exact businesses targeted by SSBCI. In Cincinnati, for example, Mayor John Cranley has proposed a $4 million investment to support the Cincinnati Minority Business Collaborative, a collection of local business development organizations invested in minority business growth, using the city's federal relief funding.

Knowledge capture and information sharing must be a priority for the federal government 

In addition to partnering with states and tribes to get capital to entrepreneurs, Treasury should also capture information and best practices from this new phase of SSBCI. While the federal government did play that role during the original SSBCI program, it can take several additional steps to provide even stronger support for states and tribes in these areas.

First, Treasury should update its collection of best practices reports to reflect developments that have occurred since their publication in 2015. While many principles will remain the same, they could be revised to incorporate important lessons learned and best practice illustrations from states during the second half of the last decade, as well as during the COVID-19 pandemic recession. These reports could be an invaluable resource for tribal governments and programs designed to support underserved communities. As a result, any updates should solicit input from tribal leaders, Native American economic development experts, and lenders and community organizations supporting underserved groups. Once updated, Treasury should proactively distribute these best practices to states, tribes, lenders, investors, and community organizations.

In addition to maintaining state-level best practices for planning and implementation, Treasury should conduct both an interim report on the status of SSBCI in several years, as well as a final evaluation sometime between 2031 and 2033. The original SSBCI program ran until 2017, but because its evaluation report was published in 2016 using 2015 data, we don't know the full extent of the program's job and investment creation, particularly on the high growth venture capital side and for underrepresented groups. A program evaluation timed a full decade or more out, with robust demographic data by race, gender, place, and other important characteristics about who benefitted from the program, will allow policymakers to get a fuller sense of the economic effects of the reauthorized SSBCI program.

Like many other components of the American Rescue Plan, the SSBCI reauthorization represents a historic investment. However, the details of its implementation will be as important to its success as the sheer size of the investment. The federal government, states, and tribes have a shared interest not only in making sure that this money gets to entrepreneurs efficiently, but also in ensuring that entrepreneurs are prepared to leverage this new funding. If implemented smartly, SSBCI will be a critical part of a broader collection of programs designed to remake the nation's economic geography and bring long-excluded groups more fully into its entrepreneurial ecosystem.

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