Mark Pentecost saw a federal loan program targeted at small businesses as a potential lifeline. The coronavirus crisis had eroded sales at his company It Works! and he wondered how he would keep paying his 164 employees.
He said there was no playbook for how to handle a pandemic. He thought the state might order him to close his warehouse to prevent the spread of the virus. He also wondered whether his sales of mostly health and weight management products, including Skinny Brew coffee, would continue to slide.
“March was a tough month,” Pentecost said. His company, based in Palmetto, applied for a Paycheck Protection Program loan and was approved about a week later for $2.7 million.
In April, sales picked up. People staying at home were buying products online. He “felt a twinge” when the company’s chief financial officer told him that the documents were ready to sign to receive the money. He decided not to accept the loan.
“It didn’t feel right to keep it," he said.
Many companies have made news lately for giving back federal loans intended to help pay employees during the coronavirus pandemic. Unlike It Works!, they were shamed into returning the money. The court of public opinion deemed them too large or too rich to deserve the federal government’s largess.
The initial pot of $349 billion tied to the Paycheck Protection Program ran out in just days, with only a fraction of the country’s small businesses able to secure a loan. That helped cement the impression that too many Main Street minnows lost out to well-lawyered titans with direct access to banks.
The list of well-known brands caught up in the backlash has grown steadily in recent days.
Ruth’s Hospitality Group Inc., the owner of the Ruth’s Chris Steak House chain, agreed to repay $20 million. Before the pandemic, the company ran or franchised 159 restaurants with more than 5,700 employees. Last year’s profits totaled $42 million.
Shake Shack returned $10 million. AutoNation will give back $77 million. The Los Angeles Lakers, $4.6 million.
Away from the chest-thumping and fist-shaking, other business leaders did the math and realized they shouldn’t accept the loan.
“Companies are supposed to need the money, not just want it,” Pentecost said. “Once you see it that way, the decision is much easier.”
The program, passed by Congress and administered by the Treasury Department and the Small Business Administration, was intended to help small businesses pay employees for the next couple of months. The idea was that many of the businesses — generally with fewer than 500 employees — didn’t have access to other types of loans to keep them afloat. The Tampa Bay Times and its related companies, which have seen ad sales drop by 50 percent since the onset of the pandemic, received an $8.5 million loan.
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Congress agreed to forgive all or part of the loans if businesses followed certain requirements. Another $310 billion was added to the pot earlier this week.
Simon Jallo owns Luekens Wine & Spirits, which has six stores in the Tampa Bay area. When the pandemic first broke out, he thought the state would require liquor stores to close. He applied for a loan so that he could pay his employees once he was ordered to shut down. In the following days, Gov. Ron DeSantis agreed that liquor stores were an essential service and could remain open.
Jallo said business has been good throughout the crisis. He didn’t think he qualified any longer for the $450,000 loan and decided not to accept it.
“We weren’t told to close, and someone else needs the money more,” he said. “A lot of businesses that applied couldn’t even get a loan because the money ran out. This should help a little.”
The Paycheck Protection Program has attracted a lot of criticism for the way it was rolled out. But it’s worth noting that behind the scenes, some businesses are still doing the right thing.
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