‘Paycheck protection’: Banks, small businesses deal with fluid situation, hope for the best

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WJHL – Frankie Bailey hopes to bring back the three quarters of her 20 Coffee Company employees who have been idled from the Elizabethton business for a couple weeks.

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Himelwright Dentistry shut down March 18, leaving Kingsport dentist Dr. Brian Himelwright’s six employees currently furloughed and collecting unemployment.

Fleenor Security’s chief financial officer is working overtime to find a supplemental resource in light of a slowdown in one sector of the business.

All are among the many area businesses that hope to prop up their businesses and save jobs through the U.S Small Business Administration’s “Paycheck Protection Program,” funded by a $350 billion section of the “CARES” Act. The program offers businesses with fewer than 500 employees forgivable loans of up to two-and-a-half months of payroll to help them keep employees on through any anticipated slowdowns.

It’s unknown when The Coffee Company in Elizabethton will again see crowded scenes such as this one.

“It’s going to be huge for us to maintain employment, bring everyone back regardless if we regain the volume through curbside, so that peace of mind is huge,” said the Coffee Company’s Bailey, who saw a PPP loan tentatively approved over the weekend. “We’ll take advantage of the time to clean and get the shop in order for hopefully a busy summer and back to normal.”

Like the COVID-19 virus itself, the relief effort presents a frequently shifting landscape. That has businesses and the banks that are serving them adapting on the fly and working nights and weekends to complete and submit applications for aid.

Bank of Tennessee CEO Dale Fair

“Change is the word here and it’s continuing change,” said Bank of Tennessee CEO Dale Fair, whose company — of which Carter County Bank is a division — processed $12 million worth of PPP loans over the weekend, including for Fleenor, the Coffee Company and Himelwright Dentistry. “Congress did a battlefield decision and we’re having to make battlefield decisions right now as we work with individual businesses.”

Fleenor CFO Chris Harrington said the company learned it could qualify early last week from its banker at Carter County Bank.

“For the next five days the information was kind of all over the place,” Harrington said. “It would change by the hour sometimes. I think we recalculated our numbers maybe four or five times to try to get there. But by Friday everything had kind of come together, we were able to get all the information to the bank and they were able to send our application over the weekend. And now we’re just kind of waiting to see how it plays out.”

The process was similar for Bailey. “We received an application and we filled that one out and then they changed it, then I eventually did a digital application,” she said.

She said the application itself is fairly simple, but documentation is key. The program bases loans off the average monthly payroll over the past 12 months.

“We all have to work together to make sense of this and make things happen quickly,” Bailey said. “I know at the bank they worked all weekend getting things lined up for this.”

Himelwright closed down by order March 18. Shortly after that he furloughed his employees, meaning the intent was for everyone to return once it’s safe to practice dentistry. The workers filed for and were granted unemployment.

“They jumped on it fairly early, which was the right thing to do, and we jumped on the PPP early too,” Himelwright said. He’s also waiting to hear on an SBA “EIDL” loan for which he applied that can cover the cost of prior obligations such as utilities.

Fair said teams from the banks’ lending and operations divisions worked all weekend to try and get their customers toward the front of the queue. Indeed, as of Tuesday afternoon Treasury Secretary Steve Mnuchin was asking Congress for an additional $250 billion to allow for additional loans as demand soars.

“We’ve already had successes and I’ve had some feedback from the SBA on approvals,” Fair said. “Nothing funded yet, but approvals are in hand and so we’re very excited about where we are right now. When you put in the extra time and ask the right questions you’re going to be ahead of the game and we feel like we’re there with our customers right now.”

Partial shutdowns, tip income covered

Even though Fleenor’s commercial business has remained steady — so far — the company still qualifies for 100 percent of its payroll at two and a half months. It can use up to 25 percent of the amount for certain non-payroll expenses.

Coffee Company owner Frankie Bailey

If Fleenor keeps all employees through that period and doesn’t cut salaries below a certain amount, the loan, if it comes through, won’t have to be paid back.

A major benefit for the Coffee Company is that it allows for tip income to be considered part of the payroll. “That’s a big deal for those employees,” Bailey said. “It’s not just their little check, they’re going to see an average of what they would make for tips.”

Will Barrett, Bank of Tennessee’s chief operating officer, said he hopes this week brings more clarity, including the go-ahead for BT and Carter County Bank to actually make the loans.

“We have the confirmation of $12 million — over the weekend when everyone else was sleeping we were able to process large numbers — but we hope as the SBA can really scale up their resources to be able to increase volume dramatically,” Barrett said.

“As the process flows I think they realized they didn’t have all the details figured out, they wanted banks to hold off before they close and fund any loans.”

Barrett did say the bank’s SBA contact has been very helpful, as have the Tennessee State Bankers Association and banking regulators, in an effort to get the funds out as fast as possible.

“This would normally would be about a three- to six-month process that they’ve crammed down to about a 72-hour period,” Barrett said. “It’s definitely building the airplane as they fly.”

Aundrea Wilcox of the Kingsport Office of Small Business Development & Entrepreneurship (KOSBE) said loan resources are available through the KOSBE website. KOSBE is also hosting free webinars each Thursday to advise business owners on loan information. You can pre-register here.

“My philosophy is, let’s go ahead and apply,” Wilcox said. “If you’re denied, so be it, but if you don’t apply you can’t get the money.”

Mickey Baker is another entrepreneur who’s applied and is expecting to get the money. He was approved for three of his five businesses Sunday after speaking to his banker Thursday and Friday. He recommended leaning heavily on one’s banker. “If they ask for additional information, do it immediately, and just stay in constant contact.”

Devil in the (still evolving) details

Barrett encouraged business owners who might qualify to get eligibility and program details at sba.gov and said he believes bipartisan support exists for additional funding.

Bank of Tennessee’s Will Barrett

To qualify for loan forgiveness, in which the loan essentially becomes a grant, a business will have to maintain full employment for the next eight weeks, Barrett said. Only 25 percent of the total can fund payments on existing loans, lease or utilities costs and other non-payroll expenses.

“It’s really meant for payroll and to keep employees employed rather than have them go to unemployment,” Barrett said.

“The devil’s in the details and that’s why I think it’s very important that everyone reads the guidance and understands that the government and the guidance we’ve gotten is it’s really based on what the borrower attests to, so the borrower really has to understand the dynamics of the program and what the requirements are for them to have the money, the loan forgiven.”

That’s one reason communication and relationships with bankers, accountants and in Himelwright’s case, professional trade organizations are so important.

“The Tennessee Dental Association (TDA) has been keeping me posted on legislative developments and lending opportunities and things of that sort,” Himelwright said.

One of his challenges centers around the uncertainty of when non-emergency dentistry will be allowed to resume. “If they come off unemployment too soon there could be a scenario where the money from the PPP eventually runs out,” Himelwright. “Hopefully we’re not looking at that kind of a time span, but if we started paying them from the PPP funds as soon as they are disbursed there is some possibility we could run out of those funds and have to put them back on unemployment.

“That’s something I’m watching pretty much on a daily basis to be mindful of what’s going to serve the employees best and not have us have to switch horses in midstream so to speak.”

For her part, Bailey is ready to put the funds to use right away.

“(Then) I can make some more decisions on ‘ok, what next,’ and making sure people are on the schedule and making the most of this very strange time for everyone,” Bailey said.

“Before this opportunity I went from about 15 employees a day down to about six, five. Knowing now we can afford to have more people we can continue the culture of what the coffee company is, keep employees working, keep them happy and keep these friendships and this business growing.”

Fleenor Security CFO Chris Harrington

Fleenor’s Harrington said despite the bumps in the road, he’s happy to have a program like the PPP — unimaginable just two months ago — already up, running and on the way toward funding businesses for its intended purpose.

“It gives us comfort, it gives our employees comfort knowing that for the next two months we’re going to keep doing what we’re doing, we’re going to keep paying people and that’s kind of one less thing to worry about.”

“Our application was filed over the weekend along with I’m sure thousands and thousands of other ones and at this point all we know is, we’re in the system, we have a spot, we just don’t know if the money’s going to run out before it gets to us or not.”

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