Wigwam Mills received $1.6M PPP loan despite massive layoffs
SHEBOYGAN – Sixteen days after laying off 85% of its employees, Sheboygan sock-maker Wigwam Mills received a $1.6 million federal loan designed to help retain employees during the COVID-19 pandemic.
Data released earlier this month by the U.S. Department of Treasury said Wigwam’s loan helped retain 145 employees, but a Wigwam executive told the Press that only about 40 employees were on the payroll as of last week, after some were brought back from layoffs with the loan money.
Wigwam’s loan was one of about 5 million Paycheck Protection Program loans, which were created as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act Congress passed in March.
Wigwam Vice President of Finance Julie Van Engen said the company rejected a first PPP loan in April because 60% of the loan needed to be spent on payroll within an eight-week window for the loan to be forgiven, and it didn’t believe it could spend that much. For
the pay period ending April 11, it had no full-time employees working in its distribution center. In late April and early May, only a skeleton crew remained working there to process orders.
Wigwam reapplied after Congress extended the forgiveness period to 24 weeks in late May, listing 145 employees on the application based on its end-ofyear 2019 staffing.
On May 20, before its reapplication for a PPP loan, Wigwam sent a layoff notification required under state and federal laws that said it would permanently lay off 121 of 142 employees because of “the adverse impact the COVID virus has had on Wigwam's operations and sales.” The layoffs took effect June 1.
Wigwam started its second PPP application on June 8 and received the funding on June 17. The lender, BMO Harris, declined comment for this story.
Wigwam did bring back some of the employees who were laid off in the beginning of June, Van Engen said. Forty employees were on the last payroll July 24, which means roughly 100 employees were not brought back.
Van Engen said the hit to the retail industry over the past few months hurt Wigwam, but the PPP loan closes the gap on cash flow and allows them to bring back employees sooner than they would have been able to otherwise.
Even with the loan, there is still a shortage of demand for the company's products, Van Engen said, so Wigwam didn't want to bring back employees or buy raw materials to make products that weren't selling.
“We didn't want to make socks to put them on the shelves, if there wasn't any demand,” she said.
The money from the PPP loan can only be used for specific expenses like payroll, rent, mortgage, interest and insurance. Van Engen said at the end of the 24 weeks, Wigwam will either need to give back the excess loan money or extend the loan. Businesses must show documentation of how the money was used to qualify for forgiveness.
“We don't have any intention of using that money for anything other than what it can be legally used for,” Van Engen said.
If a business is not able to spend 60% of more of the loan on payroll, loans will have an interest rate of 1% and deferred payments for six months.
Wigwam does expect to use 60% of the loan to cover payroll over the 24 weeks, Van Engen said. She added that 60% of the loan wouldn't have been nearly enough to cover payroll for 145 employees for the whole 24 weeks.
As Congress debates extending the loan program in a new stimulus bill, the use of PPP loans has come under scrutiny given the rushed nature of the program and the large amount of taxpayer money at stake.
The full effects of PPP can't be measured yet, but the national unemployment rate improved from 14.7% in April to 13.3% in May and 11.1% in June.
As of July 24, more than 5 million PPP loans had been approved, according to the Small Business Administration, which declined to comment for this story. The Great Lakes Region made up of Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin, received 742,034 PPP loans totaling just over $87 billion. Wisconsin businesses saw just under $10 billion of that.
Applications for PPP were supposed to be wrapped up by the end of June, but the program was extended since more than $130 billion were left in available funds.