$1 billion of PPP loans helped the Valley
Businesses say they were kept alive by COVID-19 relief aid
As soon as the pandemic forced the temporary closure of indoor dining in mid-March, restaurateur Ramiro Bravo tried to see what loan programs were available. He called, and called again, until he could get through to the U.S. Small Business Administration. He spent many mornings, at 6 a.m. or earlier, devouring the latest news reports online, researching federal aid for businesses.
Bravo was ready with his financial information when the Paycheck Protection Program opened April 3.
“I was fortunate to have done the research, and took the proactive measures to get the funding,” said Bravo, owner of Tacos Y Tequila, which got PPP loans for its Allentown and Palmer Township locations. “If you didn’t get in line then, you missed out on it.”
His experience with PPP, the good and the bad, is reflective of how many businesses and officials look at the massive federal loan program that closed Aug. 8 and was meant to help small businesses stay afloat. While there were drawbacks, including prioritizing larger businesses at first while leaving many mom-and-pops out in the cold, the program prevented even more economic carnage by approving potentially forgivable loans at a record pace.
“I think it was a great effort from a legislative standpoint,” said Tony Iannelli, president and CEO of the Greater Lehigh Valley Chamber of Commerce. “I’ve talked to many, many businesses who were kept alive by the PPP.”
Specifically, more than 9,400 PPP loans were approved in Pennsylvania’s 7th Congressional District, which includes
Lehigh and Northampton counties along with the southern portion of Monroe County. The total of those loans was $1.03 billion, which saved more than 103,000 jobs, according to data released Dec. 1 after a successful legal challenge by several news organizations that argued the SBAshould release more detailed information on PPP recipients.
Across Pennsylvania, more than 172,500 loans were approved, totaling about $20.7 billion and keeping at least 1.8 million people employed.
Earlier in the year, the SBA released loan ranges but not exact amounts. That data identified the largest loan recipients but did not disclose the businesses that received less than $150,000.
While there are clear lapses in the data — for instance, nearly one-fifth of the local PPP loans either left the jobs saved field blank or entered zero — it provides a clear picture of the wide swath of industries that rushed to claim a loan. The amounts varied widely, from $233 to $10 million.
More than 9,100 of the local PPP loans, about 97%, included enough information to sort them into business categories. Of those, professional, scientific and technical services received the largest amount of more than $106 million, which was spread across more than 1,100 loans that sustained nearly 7,400 jobs.
Ambulatory health care services was next — 795 loans totaling $103.5 million and saving about 9,950 jobs — followed by specialty trade contractors, receiving about 621 loans that totaled $84 million and supported almost 6,800 jobs.
Fourth by loan amount was food services and drinking places, with $62.3 million across nearly 700 loans that saved about 13,200 jobs.
While many of the industries that received a PPP loan this year have recovered, some remain deeply affected by the pandemic, with further deterioration expected from Pennsylvania’s latest restrictions to stem the virus’ spread. For some restaurants and other servicebased businesses, survival could depend on another round of federal help — something being negotiated in Washington.
U.S. Rep. Susan Wild, D-7th District, said she and her colleagues need to deliver a relief package before the holidays, even if it means extending a lameduck congressional session set to end next week.
“I’ve spent hours on the phone in recent weeks with small-business owners struggling to get by, who are truly worried about laying people off right before the holidays,” Wild said. “Weneed to get this done.”
How PPP helped
When the PPP opened, Bravo likened it to survival of the fittest. He had been talking to Unity Bank since mid-March, which helped him prepare. But many small businesses struggled to gain access to a PPP participating lender, most of which prioritized existing clients before accepting new ones. Many lenders also were new to SBA lending, creating a baptism by fire.
Demandquickly overwhelmed the system. The first tranche of PPP money contained $349 billion, which ran out in two weeks. In that initial round, Tacos Y Tequila in Allentown was approved April 8 for a $75,000 loan that helped retain 20 workers.
About 20 days later, by which point the PPP had been replenished and reopened with another $321 billion, Bravo’s Palmer restaurant was approved for a roughly $101,000 PPP loan that retained 25 jobs.
“We were able to keep our doors open and bring back employees, and it was basically the catalyst to where we are now,” Bravo said.
Aside from the promise of near-instant liquidity, the program attracted borrowers because of the potential for loan forgiveness.
That meant loans could transform into grants, if they were used right.
The SBA said it would forgive loans if the funds were used for eligible payroll costs, rent or utilities during an eight- or 24-week period. And that forgiveness process is ongoing for many anxious businesses.
Hotel Bethlehem decided to stretch its PPP loan out over the 24-week period. Bruce Haines, managing partner, said the hotel applied for a loan April 3 and received nearly $1.3 million 10 days later.
“I was shocked at howefficient they were at getting money into people’s hands,” Haines said.
It was the quick injection Hotel Bethlehem needed.
The full-service hotel, which has on-site dining and significant meeting space, was mostly shut down in the early days of the pandemic. Its ice cream parlor, for a time, became its biggest revenue generator, as a staff that numbered 225 employees in February was whittled to just 21 by the end of March.
Slowly, furloughed employees were brought back as restrictions eased and portions of the facility reopened. The PPP loan lasted until mid-October, which helped Hotel Bethlehem pay its staff, which had rebounded to 135 employees.
“Certainly, the hospitality industry was the most affected industry, and the first round of PPP was a godsend,” Haines said. “It saved Main Street. It not only saved the hotel, it saved Main Street.”
As the loan ran out, Haines said some of the hotel’s business began to recover, with restless consumers venturing out to shop and dine, mostly outdoors.
The Hotel Bethlehem staff members that haven’t been called back to work, Haines said, are involved with the facility’s banquet and meetings business, which normally is responsible for 40% of the hotel’s business. Pennsylvania’s latest restrictions, which went into effect Saturday, limit indoor gatherings and events to no more than 10 people.
How it was distributed
In the initial rush of applications, larger businesses with existing banking relationships and more resources were among the quickest to obtain PPP funding.
The program’s rules allowed any business, nonprofit or other organization to apply if they had fewer than 500 employees. Food service businesses with more than one location could apply if they employed fewer than 500 people per location.
Somepublic companies landed PPP loans, which quickly came under fire because of their ability to raise capital through other means. Shake Shack, the publicly held burger chain, was among the businesses to land a maximum $10 million loan, though it returned the money following criticism.
And a few private companies also caught flack for filing — legendary quarterback Tom Brady’s Massachusetts sports performance and nutrition company, TB12 Inc., was approved for a $960,855 loan
April 15.
In the Lehigh Valley, records showFuling Plastic USAInc. was approved April 10 for a $572,000 loan, which retained 57 jobs at its straw-manufacturing plant in Upper Macungie Township. At that time, Fuling was part of the publicly traded Fuling Global, which went private last month. Fuling did not respond to The Morning Call’s inquiries and has not publicly commented on the loan.
Fuling was one of more than 125 Chinese companies that received PPP loans, according to an August analysis by strategic consultancy Horizon Advisory.
Data in the Lehigh Valley’s congressional district shows, by average, the largest loans were approved early in the program. The average PPP loan for the week ending April 5 — the program’s first week — was more than $372,000. That gradually fell in the weeks that followed, to about $69,500 by early May and roughly $28,000 by the time the program ended in August.
While some big businesses sped through the process to clinch loans, many mom-andpops and minority-owned businesses sought guidance and scrambled, missing the boat.
Though some aspects of the program were corrected, a significant percentage of PPP funding went to the largest firms, a result that played out across the country.
In the 7th Congressional District, 177 PPP loans — about 2% of the more than 9,400 local loans — were approved for more than $1 million each. Those loans cameto$370.5 million, about 36% of the region’s total funding. They supported morethan 26,600 jobs, about 1 in 4 of the district’s saved jobs.
The four largest loans in the region each wenttoward supporting about 500 jobs, records show: $10 million to Bethlehem candymaker Just Born; $7.8 million to Upper Nazareth Township guitar-maker C.F. Martin & Co.; $6.6 million to Red Robin franchisee Lehigh Valley Restaurant Group; and $6.1 million to transportation provider Easton Coach Co.
There also are plenty of lapses in the SBA’s data.
For example, of those 177 area loans of more than $1 million, 16 left the jobs retained section blank, while another six loans had a zero in that spot.
That means the public doesn’t know how many jobs were saved by 22 local loans totaling almost $44 million.
Looking at all of the PPP loans in the Lehigh Valley, more than 1,800 loans — nearly one-fifth — either entered zero or left the jobs field blank. Thetotal of those loans was $132 million.
Across the country, more than half a million PPP recipients reported saving zero jobs, government watchdog organization Accountable. US found.
It’s also not clear if the loans delivered a great bang for the buck. The National Bureau of Economic Research estimated that it cost $377,000 to save each job at PPP-eligible firms from April through mid-August; the average annual earnings for employees at these firms was roughly $45,000.
According to the same research, firms in the professional, scientific and technical services industries received a greater share of the PPP loans than firms in the hotel and food services industries — even though the former group accounted for less than 5% of lost jobs in February and March, before the pandemic fully registered, while the latter group accounted for 50%.
Hoping for more
While cracks in the program were exposed, especially early on, PPP buoyed many small businesses and kept workers off unemployment — at least for a time.
“I feel the program worked well after we got through all the hurdles in the beginning,” said Jeff Barber, president of Lehigh Financial Group, which specializes in SBA lending. “I think it helped a lot of business owners it was supposed to help.”
Barber and other Lehigh Valley officials believe another round of PPP-like loans could be warranted before long, especially with the latest restrictions to address soaring case counts.
But this time around, Barber and others believe such a package should be targeted at certain industries, since some business categories have recovered more than others. Many restaurants and hotels, for example, are among the businesses still suffering.
“Targeted would be the better way to use our tax dollars to help the ones that really need the help,” Barber said.
Hotel Bethlehem has been able to recover some of its business but is still down from a typical Christmas season. And with his meetings and events business essentially shut down, Haines said it is “virtually imperative” to have another round of PPP as service-related venues like Hotel Bethlehem enter whatis typically a cash-draining first quarter.
“Until such time as the government allows businesses to operate normally, we need help,” Haines said. “We’re the ones that should get the PPP, the people that are essentially told to shut down major revenue-generating sources of their businesses.”
Without it, he forecasts that some small, independent businesses could close onBethlehem’s Main Street — and many other main streets around the country.
“We have a Top 10 Main Street that is seriously jeopardized without a second round of PPP,” Haines said.
At Tacos Y Tequila, Bravo said his restaurant business slowed down again about two weeks before Thanksgiving, as the virus resurged. He estimated his business has seen a 40% drop versus a normal year.
If there is another round of federal help, Bravo hopes the process will improve. He hopes officials stress the urgency for small businesses to get in line for the program, so more can benefit and survive the pandemic.
“Hopefully, it will be cleared up and more defined next time,” he said.
But first, there has to be a next time.