Metro Detroit businesses hope to not lose out again on Paycheck Protection Program

Down to just carryout food service, McShane's Irish Pub laid off most of its 67 employees at three southeast Michigan locations after the coronavirus pandemic hit.

To help his business survive, co-owner Bob Roberts applied for the Paycheck Protection Program, the high-profile federal program of low-interest loans for small and mid-size businesses that convert into grants if at least 75% of the money is spent to maintain pre-pandemic payroll.

Roberts submitted applications to each of the locations' banks between April 6 and April 8. Yet by the time the program's initial $349 billion pool of money ran dry April 16, he hadn't received any loans and was still waiting.

Now, he is hoping for better luck in coming weeks once the U.S. Small Business Administration replenishes the program with $310 billion in additional funds.

McShane's empty-handed experience is unfortunately common in Michigan, according to business leaders and other owners, as some banks were slow to accept the program's online applications and news reports suggest that others had a "two-tier" system and served their wealthiest customers before smaller mom-and-pop operations. In other instances, demand for loans may have simply overwhelmed available funds. 

More:Michigan small, mid-size businesses to start receiving assistance money soon

Roberts, who is also president of Detroit's Corktown Business Association, said that as of early this week, none of the 26 Corktown businesses that applied for paycheck protection funds had received anything. 

“I don’t think that the process with awarding the loans was very equitable and inclusionary," Roberts said. “It was a race to see who got (applications) in first, and more importantly, whether or not your bank had their processes and procedures down to be able to process your application."

The program's second tranche of money is to come next week with the latest coronavirus relief legislation, signed Friday by President Donald Trump. Businesses do not have to reopen for business to use the program's money — just restart their payroll if they want the loan to become a grant.

“I really, really hope we get it, but who knows?" said Chris Gross, co-owner of Berkley Common restaurant in downtown Berkley, which employed 25 people before the crisis and is still waiting for $80,000 to $90,000 in paycheck protection money to come through. “If we get the loan, we can hire people back at what they were making and take the time to prepare to reopen.”

Michigan businesses and eligible nonprofits were approved for 43,438 Paycheck Protection forgivable loans for the initial round, totaling about $10.4 billion, according to the Small Business Administration.

Nationwide, the average size of the loans was $206,000 and the construction industry was approved for the most dollars (13% of the total). The business administration has yet to report loan details for individual states.

There already are worries about the second batch of paycheck protection billions running out before all businesses that need the money can get it.

"We think there are about 100,000 that were eligible, so this next tranche of funding is really important," said Brian Calley, president of the Small Business Association of Michigan and the state's former lieutenant governor.

Smaller did better

Calley said that smaller financial institutions seemed quicker to accept and process businesses' paycheck protection applications than some large banks.

“I think the bigger banks were trying to get the application portal more automated and (do) everything online,” he said.

Businesses have been encouraged to apply for the forgivable loans through their regular banks. However, they can also apply through various non-traditional lenders including PayPal, Square and Liberty SBF. 

Comerica Bank, formerly headquartered in Detroit but since 2007 based in Dallas, has come in for particularly strong criticism by small business owners who say the bank was slow to begin accepting applications.

Batch Brewing Co. in Detroit, which employed 18 people before closing for the pandemic, tried to apply for a $104,000 loan through its longtime bank, Comerica, but the bank's online application portal wasn't working until after the program's initial money was gone, according to owner Stephen Roginson.

Roginson said he will still apply for a paycheck protection loan, but through a different financial institution because he is severing all ties with Comerica.

“I am hopeful for Round 2," he said.

A Comerica spokesman wouldn't discuss the late opening of the bank's application portal, but said they are now accepting applications.

"It is important to remember that due to extremely high demand for this program, all institutions who are accepting applications cannot guarantee how quickly the volume of applications can be processed ... nor guarantee that funds will still be available," the bank spokesman said.

Personal connections help

Janet Jones, owner of the bookstore Source Booksellers, 4240 Cass in Detroit, also applied for a paycheck protection loan, but has yet to receive it. She is thankful for a $2,500 emergency grant she received from TechTown Detroit's Small Business Stabilization Fund, which helped her make store bill payments.

Jones said she knows that her paycheck protection experience wasn't unique.

“We’ve had a lot of contact with virtual meetings with our fellow booksellers across the country," Jones said. "The only ones who seem to have gotten through is someone who had a connection with a bank on a personal level.”

Although she closed her store to in-person customers and had to furlough four employees, she continues to sell books by mail through the store's new website. And the website has been generating sales with new customers across the country.

"There are some positive things that have happened," she said.

Chiropractor biz hoping for $150K

Be Well LifeStyle Centers, 750 S Old Woodward Ave. in downtown Birmingham, has had to close most of its building, aside for its cafe and chiropractic service. The chiropractic service is considered an essential business that can operate under Gov. Gretchen Whitmer's "Stay Home" order.

Owner Silvio Cozzetto said his patients have been a mix of his regulars as well as new clients whose chiropractors are closed. He now performs all his treatments while wearing gloves and a mask, he said.

Cozzetto said he is down to about three employees from the 20 he had, and various technical problems required him to submit his paycheck protection loan application three separate times to his bank, Chase Bank.

He hopes his $150,000 request will come through in Round 2. He said he knows of other small businesses that were shut out of Round 1 but can no longer wait.

"I have patients who are in their 60s and have started their business — and they’re done," Cozzetto said. "And they didn’t need that much money. They needed 5, 10, $15,000, and they didn't get it. And the airlines got billions.”

Barber shears, face mask and gloves 

The Social Club Grooming Co., a Detroit barbershop with two locations, also is waiting for paycheck protection money.

Owner Sebastian Jackson said he had no trouble applying for the loan and is crossing his fingers that it will finally come through once the funding gets replenished.

His 12 employees are currently collecting unemployment benefits, which isn't that bad considering the new $600 weekly federal benefits that complement Michigan's normal per-week benefit, which maxes out at $362. Still, that means a drop in income for many of the employees.   

“Most of our full-time barbers make above that $962 a week with tips and things, which is not common in our state," Jackson said.

Once his shops finally do reopen, the customer experience will be a bit different than before coronavirus. For instance, get ready to see barbers wearing gloves, face masks, face shields and perhaps even special sanitized clothing.

"We are looking at a new reality," he said.

ContactJC Reindl at313-222-6631 or jcreindl@freepress.com. Follow him on Twitter @jcreindl. Read more on business and sign up for our business newsletter.