Survey: Surprise businesses have little time to wait

One-third say they can last only 1-2 months

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A new Surprise Regional Chamber of Commerce survey is sounding the alarm for getting the economy back on track.

Nearly one-third of more than 100 businesses in Surprise report having no more than two months cash reserves on hand to remain open. Additionally, about a quarter of Surprise business have no idea how long they can last.

If the current situation with the COVID-19 pandemic doesn’t clear up soon, Chamber President and CEO Raoul Sada fears for the future for some local businesses.

Making matters worse, none of the businesses in the surveys reported receiving any federal money from the Payment Protection Program loans that were part of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Now, those funds are out of money — although the government said it provided nearly $3.5 billion to nearly 11,000 Arizona small businesses from it. But it’s still unclear who in Surprise received any money.

“We’re dealing with two crises right now — CV19 and an economic one,” Mr. Sada said.

The Chamber surveys tracked how businesses are obtaining loans and grants from the Small Business Association and other lending institutions during the crisis. They found businesses know about the loans, most of them have applied for them but none of them had seen any money yet as of April 14.

The Surprise Regional Chamber of Commerce held a video conference with more than 100 business and political leaders last week to give them the news of the surveys.

Vartan Djihanian, the manager of the Western Region in the Congressional and Public Affairs Division for the U.S. Chamber of Commerce, gave viewers and listeners on the video conference call a look into how Surprise businesses are affected by decisions in Washington, D.C.

“We realize the economy is shut down through the fault of nobody,” Mr. Djihanian said. “Two months ago, we had the best economy in history. Now, we’ve come to a complete stop.”

Mr. Djihanian said it’s obvious that unemployment numbers will look bad in April and May. 

“In the third quarter there will be a snap-back growth rate at 6 to 7%, which is phenomenal,” Mr. Djihanian said. “But to get there, we need a bridge.”

The surveys say

A majority of the members of the Surprise Regional Chamber are Surprise businesses.

More than 100 companies were surveyed to monitor trends and emerging issues, with those polled in construction, retail/restaurant, services and professional services.

Other survey results found nearly one-third of the respondents (31%) felt they could last three to five months before having to close up shop. 

A little more than 6% estimated being able to stay open six to 12 months

Nearly 19% of respondents said they can remain open indefinitely. Construction, which hasn’t stopped, is likely making up a big portion of that figure.

The surveys tracked opinions on the local, state and federal response to the pandemic.

Business leaders are giving the Surprise government response more negative than positive reviews.

More than 39% of respondents were completely dissatisfied, mostly dissatisfied or somewhat dissatisfied by the local response to COVID-19. Alternatively, nearly 29% were completely satisfied, mostly satisfied or somewhat satisfied. Just a slight bigger percentage (30%) were neither satisfied nor dissatisfied.

There’s a little more positivity on the state level, although opinion is still split.

Nearly 38% of business leaders were either satisfied or dissatisfied with the state’s response to the pandemic. Nearly 24% of respondents had no feelings on it.

The most positive feelings come from the federal government’s response. About 37% of business leaders are happy with it, while about 29% are at least somewhat dissatisfied.

Loan types

However, one thing business leaders have made clear is the federal government needs to step up to provide more small business protection money.

Business had the options through last week to apply for two types of relief loans — the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL).

The PPP was designed to provide small businesses and non-profit 501(c)3 organizations with 500 or fewer employees with loans of up to $10 million. The money was to pay a maximum of eight weeks of payroll and overhead costs.

The money could also be used to pay health insurance, interest on mortgages, rent and utilities. 

These loans will be 100% forgiven when used for these qualified expenses, but the stipulation was at least 75% of the forgiven amount must have been used for payroll.

“It’s designed to keep people employed,” said U.S. Congresswoman Debbie Lesko (AZ-8), who joined the Chamber video conference. “That’s the gist of the whole thing. This is designed to keep paying your employees whether you’re open or not and then the loan will be forgiven.”

Self-employed, sole proprietors, and independent contractors were also eligible to apply for PPP.

In the Chamber’s surveys, nearly 98% of business owners said they were aware of the loan program and nearly all of them applied for it.

Nearly 79% of respondents said they successfully submitted the application, while 14% said they weren’t able to.

Of those that successfully applied, nearly 82% of them hadn’t received any notice back yet as of April 14. A little more than 9% each were either approved and denied, according to the survey.

Mr. Sada said some of the banks have been slow to process the loans and some aren’t technologically able to handle them.

Mr. Djihanian said it will take some waiting.

“Just because you haven’t heard back from the bank doesn’t mean you didn’t get the loan,” Mr. Djihanian said. “The system has been inundated. Just be patient right now.”

Loan problems

While it’s unclear how Surprise small businesses may be helped by PPP money so far, at least one has received good news.

The Joint Corp., a national franchisor of chiropractic clinics with two Surprise locations, was one of the lucky ones. The company announced April 15 it received a $2.7 million loan under the PPP program through JPMorgan Chase Bank.

In a news release, the company said it plans to use the money primarily for payroll and to retain workers.

“The Joint and our franchisees are thankful the CARES Act is supporting small U.S. businesses and their employees during this unprecedented time,” wrote president and CEO Peter D. Holt in the statement. “Along with $2.0 million drawn in March from our revolving credit facility with J.P. Morgan Chase Bank, N.A., the PPP loan strengthens our balance sheet. This increased liquidity enhances our ability to maintain our payroll and weather the disruptions caused by the COVID-19 pandemic.”

Mr. Sada said well over 100 businesses in the Surprise area have applied for loans and grants. Overall, the Chamber said Surprise has 800 businesses with five or more employees.

Ms. Lesko sounded the warning to business owners on video conference that the money was running out fast, probably by the end of the week of the video conference.

It turns out the funding reached its $349 billion limit on April 16. It happened at a time when thousands of small business owners whose loans have not yet been processed must now wait for additional funding to be passed.

“It’s been a very extensive week for banks that are giving out these loans,” Ms. Lesko said.

Ms. Lesko said President Trump and the Republicans in the Senate want to add another $250 billion dollars to paycheck protection plan, but as of April 16 Democrats had blocked it.

“We’ve called on the Democrats to do this,” Ms. Lesko said. “They want to add in an additional $250 million to paycheck protection — $150 million to states and cities and $100 million to hospitals.”

Ms. Lesko said Democrats already got funding for those areas in the last go-around, but as of April 14 she said only $30 billion of that money had been dispersed to states, cities and hospitals.

Mr. Djihanian called them “partisan squabbles” right now.

“At the end of the day, I think they’ll come together to replenish that account,” Mr. Djihanian said.

The Surprise Chamber’s website plans to have a link that will generate a customized letter that will go to elected officials.

Return to normalcy

National guidelines to phase in the economy are still being set.

Midwestern states Michigan, Ohio, Wisconsin, Minnesota, Illinois, Indiana and Kentucky agreed April 16 to begin reopening their economies Friday, May 1. Other places that aren’t COVID hot spots could decide to follow suit and reopen soon.

But in Surprise, it’s almost impossible to tell if the city has reached any kind of peak with the number of cases.

When the Maricopa County Department of Health Services first released coronavirus cases by zip code earlier this month, the first apparent hotspots in the Valley were in Peoria, Scottsdale and Paradise Valley.

“My concern is that the businesses shut down rather quickly, but it’s not going to return to normal rather quickly,” Mr. Sada said. “It’s almost like what happened after 9/11. People were hesitant to fly. There will be a period of time for people to get into the swing of things, and it could take months.”

Ms. Lesko said rehiring a workforce could arise out of the portion of the CARES Act that adds money to unemployment insurance. At least temporarily, those who qualify will receive an extra $600 on top of the normal maximum of $240. That equates to about $21 an hour for a 40-hour week.

“Some small businesses don’t pay $21 an hour,” Ms. Lesko said. “Many are going to file for unemployment and not want to come back to work. That would be a problem.”

Silver linings

However, Mr. Sada believes the crisis will eventually make things better in the long run.

“I think we’re all going to re-evaluate how we do businesses from what we learn,” he said. 

Surprise was in a similar situation just three years ago when Bell Road was shut down at Grand Avenue to construct what is now called Veterans Bridge.

As businesses in Surprise’s original shopping area struggled to retain customers during the construction mess, the Surprise Chamber adjusted with some digital advertising to help the businesses out.

“It was out of that adversity that caused us to be creative to think outside the box and come up with new solutions,” Mr. Sada said. “[COVID-19] is the same thing we’re going to go through but on a much larger scale. Businesses that come out will have new practices, new safeguards, new contingency plans. We will come out stronger from this crisis.”

Mr. Sada said the Chamber itself is set up to function in the digital age.

“We were already moving to virtual services with smart technology,” Mr. Sada said. “We have our ‘Shop Local’ [campaign], which is all digital. All the advocacy stuff we do, that still functions somewhat in today’s virtual environment.”

Because of the hardships the virus has caused, the Surprise Chamber is being lenient on membership dues for the time being.

Mr. Sada said 75% of the businesses in the chamber employ less than 10 people, and some of the smaller ones will have an “impossible” time paying.

“We will not drop any member just because they can’t come up with their dues,” Mr. Sada said. “We want them to have all the horsepower of the Chamber because that’s when they need us most.”

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