Like many small-business owners, Chris Paige had to abruptly close the doors of his south Jackson barber shop, Custom Cuts & Styles, because of COVID-19. That decision has not only cost him, but also the three other barbers who work inside his business.
“That really affects me because you know, I just hate to have to see someone out of work. Because that’s how we feed our families,” the father of three girls told the Jackson Free Press in early April.
A native of Jackson’s Washington Addition neighborhood, Paige has been a licensed barber for 21 years, though he has been cutting hair for longer.
After working for others for nearly a decade, the former Academy of Hair Design instructor saw an opportunity in 2010 to invest in south Jackson, an area he knew intimately since childhood.
Paige found a storefront on Terry Road—a well-traveled thoroughfare that promised to bring in a lot of customers—and applied for and received a City of Jackson small-business development grant. This August will mark the barbershop’s 10-year anniversary. He also opened Paige Barber Supply two years ago. The supply store, too, is closed because of the pandemic.
Paige does not have employees on payroll. Like many other barbershop and salon owners, he rents out space in his shop to other barbers, who function as independent contractors with their own clientele. As such, he is not sure that he is eligible for the Payroll Protection Plan.
“I have people that subcontract inside the shop with me. … They don’t get a W2, I don’t pay them,” Paige said.
“The money that they were paying me for their chair—I don’t know how I can be compensated for that because they’re not my employees,” he added.
Paige’s eligibility for PPP depends on whether he is a self-employed, sole proprietor or operating as an entity, Jackson-based attorney David Humphreys confirmed to the Jackson Free Press on April 14. For an entity—such as an LLC or S-corp partnership—to be eligible for PPP, they must have a payroll. But if a person is self-employed and files a schedule C on their tax returns, and their contractors pay that individual directly, the self-employed person can apply for PPP even without a payroll. They can instead report losses in their net income.
Although he is grateful for the relief options available to small-business owners struggling because of the novel coronavirus, Paige wishes the packages were more inclusive of all industries.
“It does limit my options,” Paige said.
He recently worked with his accountant to apply for the low-interest Economic Injury Disaster Loan through the Small Business Administration—his most promising option at the moment. He also applied for unemployment benefits.
Paige is concerned about the pressure the SBA loan places on small businesses to take out additional loans. Most small business owners must already incur debt in order to be able to start a business, he explained.
“I would have liked to see a little more grant money or an easier way to do the grant money than the loan, because as a business owner, we already have loans that we are paying back, so we’re actually adding more debt to our debt-to-income ratio,” Paige said.
“Now we’ve got the choice of completely going broke or going out of business or taking on more debt that we’re still going to have to pay off when we already had debt we were paying (off),” he said.
Paige is also concerned about the confusion stemming from the SBA loan application process. “I heard from other business owners they’re having a hard time just getting the process done. Some just don’t know to go apply for some of this stuff,” he said.
He has been using his own social-media pages to direct his network toward online unemployment, SBA, and PPP applications. Just six days ago, he had to resubmit his unemployment application because his previous application suddenly disappeared from the Mississippi Department of Employee Security website.
Impact on Black Businesses
The COVID-19 pandemic has hit small businesses, which typically do not have more than two weeks’ worth of working capital funds at any given time, especially hard in recent weeks. Despite the fact that the SBA has promised small business owners up to $2 million in loans each for damages due to COVID-19, many businesses are struggling to secure even a fraction of what was offered to them.
In addition to long processing times, on April 9, the SBA began notifying those whom it did approve that they would in fact not receive more than $15,000 each. A day later, the U.S. Chamber of Commerce sent a letter to Congress requesting additional Economic Injury Disaster Loans and Payroll Protection Plan funds, warning that “such limited economic relief will be insufficient for a great many main street employers.”
“No family and no business should be bankrupted by the temporary economic disruption caused by the coronavirus pandemic,” the letter concluded.
Advocates worry that minority-owned businesses, which already operate on an uneven playing field, will suffer the most. A 2020 Brookings Institute study on the devaluation of businesses in majority-black neighborhoods, for example, pointed out that black-owned businesses struggle significantly more than their white counterparts to secure loans.
Despite the inflated risks the novel coronavirus poses for minority-owned businesses, Congress earmarked just $10 million—or 1%—of its $2.2 trillion COVID-19 stimulus package to fund the Minority Business Development Agency, which works to connect minority-owned businesses to loan and grant opportunities.
In an April 6 phone interview, Rep. Jarvis Dortch, D-Jackson, pointed out an additional barrier that could prevent small and minority business owners from accessing government relief. The SBA is not disbursing funds directly to businesses but rather to private banks.
“I think private banks are making their own rules on who they’re going to serve, who they’re going to make a priority,” Dortch said.
He noted that Bank of America, for example, is requiring SBA applicants to have already banked with them prior to the pandemic in order to be eligible for a loan. On April 13, U.S. District Court Judge Stephanie Gallagher declined to grant an injunction against the bank after Maryland small business owners filed a federal class-action lawsuit against it for prioritizing existing clients.
A group of advocates from across the state, including lawmakers, have been holding tele-town hall meetings in recent weeks to provide business owners with information on how to apply for and secure a loan.
In an April 9 call with the Mississippi Black Legislative Caucus to discuss the impact of COVID-19 on black Mississippians, Hope Credit Union CEO William Bynum warned of the difficulties that the private-bank loan requirement poses for most, non-traditional small businesses in America, and black businesses in particular.
“They’re going to take a major hit,” Bynum said on the call.
The federal government must do more to ensure that relief funds reach those who are most at need, he said, especially business owners who do not have relationships with large private banks or who are deemed ineligible for SBA relief by them.
Credit unions like Hope serve businesses and people that banks and governments have historically underserved. This includes people of color, which represent 80% of Hope’s clients, women, and people who earn less than $35,000 a year, who account for about half of the credit union’s client base.
“They’re going to really have to get that money down to the CFIs (community financial institutions), to the small communities, to the small credit unions … in order to reach the masses of small businesses that may not have that banking relationship to receive the money through the traditional routes,” Bynum said.
He also called on lawmakers to consider consumer protection measures during the pandemic, given the likelihood of an increase in predatory loans that can further entrap business owners and individuals in debt.
Watching for Predators
Ed Sivak, executive vice president of policy and communications at Hope, echoed the need for consumer protections. One of his clients, who recently struggled to meet mortgage payments, turned to another lender who in turn contacted Hope to obtain additional information about the client. The loan, Hope discovered before the client signed it, had a 700% interest rate.
“It just goes to show that as resources come in, there’s going to be financial predators out there trying to take advantage of people. We saw this after Hurricane Katrina,” Sivak told the Jackson Free Press in an April 14 phone interview.
He emphasized the necessity of additional protective policy solutions as the government disperses $1,200 stimulus checks, namely debt and fine-collection suspensions and other debt relief so that people can receive their checks in their entirety. “At this time, again, we need to make sure that all resources available are directed towards meeting the needs of people that need them most,” Sivak said.
More than half of Mississippi households experience liquid asset poverty, meaning that they do not have savings to enable them to survive beyond three months in the event of income loss, a Prosperity Now Asset and Opportunities Scorecard found.
For black Mississippians, the situation is even more grim: 72% of black households cannot afford to go without an income for three months.
Hope Credit Union has seen a high demand for SBA loan assistance and PPP, Sivak said. “So far we’ve had 104 requests totaling $28 million of small-business owners that we are going to be supporting through that program. And it’s a wide swath of businesses,” Sivak said.
“Pest-control businesses, childcare centers, and home health and restaurants, hospitals—rural hospitals—housing developers. … All of these are businesses, Mississippi businesses, in need of support,” Sivak said.
‘It’s Going to Take the Community’
Last Christmas season, Emmie King, who owns Nandy’s Candy in Maywood Mart in Jackson purchased a health-insurance policy for her employees. Her landlord also increased the rent for the building in which she operates.
King, who is trying to save her family’s 39-year-old candy manufacturing and retail business, said that the timeline on which the PPP and SBA loans operate do not take into account the more recent cost increases businesses may have incurred. Nevertheless, she applied for PPP, which would allow her to keep her business afloat for at least 2.5 more months, if it is approved.
The businesswoman is aware that governmental relief is not going to be enough, especially when most small businesses already have outstanding loans. She wishes that the government had acted earlier so that businesses could have had more opportunity to prepare for the fall-out.
“It’s not going to be this (PPP) loan which saves the business, it’s really going to be the hard work of my employees and the work of me to reduce costs, to find places to save,” she said on April 13. That will likely include forgoing a paycheck for herself, she added.
While King is grateful that she can still conduct some business curbside, she knows that her barber and nail-technician colleagues do not have that option.
“I know it hurts a lot of businesses that may never come back. I think that’s a fear for all of us,” she said.
King intends to do all that she can to sustain her business, but she and other small-business owners will need the support of the local community to aid them towards recovery, King told the Jackson Free Press.
“I think it’s going to take the community, not just an SBA loan, to make everything come back. I think it’s really going to be the kindness of the American people,” King said.
‘We Were an Absolute Afterthought’
Jackson restaurateur Mitchell Moore had to shut down all three of his businesses—including a four-month-old donut shop Belhaven—after people stopped coming in because of the COVID-19 outbreak. Like many other business owners in the city, Moore had to get creative to keep his family afloat and support his employees during the pandemic.
“I realize that all of my staff, they’re in the same boat that I’m in,” Moore said in an April 3 phone interview. “We have nothing, literally nothing.”
He has been working 60-hour weeks, baking bread and selling other baked goods through take-out pop-ups at Campbell’s Bakery in Fondren (Monday through Friday) and Campbell’s Craft Donuts in Belhaven (Friday and Saturday), and sharing sales proceeds with his employees, some of whom live paycheck-to-paycheck or rent homes.
At the same time, Moore has been exploring what kind of governmental relief he can benefit from as a small business owner.
Moore is disappointed that the federal government has protected large corporations, while doing what he says is comparatively little to support small business owners who are particularly vulnerable right now.
“You’ve got bail-outs for big business,” he noted. “They don’t actually have to physically pay that back, but for us, for small business people, their solution is, ‘here you go, take a loan.’ Well, I don’t want to take a loan,” he said.
Moore is already in debt as a result of opening his newest business in Belhaven, and now that he finally owns his two other businesses, he is hesitant to go into debt again.
Though he lauded lawmakers for bridging partisan lines and coming to a swift decision, Mitchell wishes that they had considered the scope of the pandemic’s impact on small businesses.
“I’m really disappointed that this is the solution that they came up with, out of $2 trillion,” he said. “They thought about servers and people who had lost their jobs, and they thought about big business. But the small business, it feels like a throwaway,” he said.
“It feels like we were an absolute afterthought,” Moore said.
Email city reporter Seyma Bayram at [email protected] and follow her on Twitter at @SeymaBayram0.
PPP, Unemployment, SBA Loans
The Payroll Protection Plan, which the government is ostensibly offering to businesses in operation since before Feb. 15, offers loans of two-and-a-half times that business’ average monthly payroll cost, though it does contain some restrictions, such as a $100,000 salary cap per employee. If businesses use PPP funds to cover payroll, including paid sick leave, health insurance and retirement plan contributions, the government will forgive that portion of the loan, essentially turning it into a grant.
People who have been laid off or sent home without pay, and workers who have contracted COVID-19 or are caring for someone with the disease can apply for unemployment through the Mississippi Department of Employee Security.
Mississippi small-business owners can also apply for the low-interest disaster assistance loan, called the Economic Injury Disaster Loan, or EIDL, from now until Dec. 21, 2020.
Specifically for COVID-19 response, a $10,000 emergency advance is also available to businesses that apply for the loan. Businesses are not required to pay back the $10,000 advance, which functions like a grant, regardless of whether or not they qualify for the loan, Jackson attorney David Humphreys confirmed April 3. (If you receive both an EIDL advance and PPP loan, some of that overall number may not be fully forgiven, Humphreys said.)
Business owners should assess the impact of the novel coronavirus on their operations from Jan. 31, the date the virus entered the U.S., and compare it with their prior years of operation. Applicants must prove that they have experienced a loss in their revenue or production because of the COVID-19 pandemic, and they must have fewer than 500 employees.
Applicants can benefit from up to $2 million each in loans for damages due to COVID-19. Interest rates vary, from 3.75% for small businesses to 2.75% for “most private nonprofit organizations,” Lampton said.
The funds can pay debts, payroll, accounts payable and other general expenses, Lampton said.
Businesses registered in the State of Mississippi and have filed tax returns with the Internal Revenue Service—a schedule C for sole proprietorships or a corporate tax return for corporations—are eligible.
During a March 20 teleconference call, Michael Lampton of the SBA explained that while the SBA takes into account a business’ credit history in determining whether or not to approve the loan, people should apply regardless of their credit.
Businesses can extend repayment for up to 30 years and defer payments for up to one year, he said. Applications are available at www.sba.gov/disaster. Applicants can also call 1-800-659-2955 to request a paper application and to ask questions related to the loan.
Read the JFP’s coverage of COVID-19 at jacksonfreepress.com/covid19. Get more details on preventive measures here. Read about announced closings and delays in Mississippi here. Read MEMA’s advice for a COVID-19 preparedness kit here.
Email information about closings and other vital related logistical details to [email protected].
Email state reporter Nick Judin, who is covering COVID-19 in Mississippi, at [email protected] and follow him on Twitter at @nickjudin. Seyma Bayram is covering the outbreak inside the capital city and in the criminal-justice system. Email her at [email protected] and follow her on Twitter at @seymabayram0.