Providence business owners skeptical of Paycheck Protection Program

Business News

PROVIDENCE, R.I. (WPRI) ─ The Small Business Administration reports that 4,110 businesses in Rhode Island were approved to receive loans through the Paycheck Protection Program – a federal fund that provides loans to small businesses.

But the program, also known as PPP, ran out of money last week. On Tuesday, the Senate approved a relief package that provides an additional $310 billion to the fund that is meant to keep businesses afloat for the next eight weeks.

In Rhode Island, Knead Doughnuts and Providence Bagel were two businesses approved for the initial round of money offered through the program.

Adam Lastrina, the owner of Knead, said he laid off 30 of his 34 employees when the coronavirus pandemic began. Chris Wietecha, the owner of Providence Bagel, was forced to make a similar decision – laying off about 80% of his staff.

Both businesses remain open right now, but their business models have shifted to meet the decreased staff and demand.

“As a small business owner, what a tough spot to be in,” Lastrina said. 

As Lastrina and Wietecha work to keep their businesses running, they said they were relieved to hear about a federal program that could help.

The $350 billion program was approved by Congress last month as part of the $2 trillion CARES Act rescue bill. Small businesses with 500 or fewer employees were eligible to apply for federally-backed loans administered through the SBA, which can be used to pay for payroll, rent and utilities for eight weeks.

Matt Sheaff, a spokesperson for the Rhode Island Commerce Corporation, said federal guidance suggests 75% of the PPP loan has to be spent on payroll, while the other 25% could be spent on items like rent or utilities.

“At first, it sounded like an amazing program,” Wietecha said. “Like, wow! We’re going to get forgiven payroll and 25% of that money can also be used toward our rent and electric bills. So it sounded great until things started to really come together and there were so many uncertainties.”

Wietecha said his biggest worry is rehiring all of his employees for the next eight weeks in order to use the loans.

Both he and Lastrina said they are concerned about bringing back their employees, who are currently making more money by collecting unemployment, due to the additional $600 in weekly benefits.

“From their perspective, it’s probably, ‘Sweet! This is more money than I was making.’ And from our perspective, that’s great,” Lastrina said. “We don’t want to necessarily take that away from them. But then it takes away the incentive of getting back to work.”

Angelika Pellegrino, a spokesperson for the Rhode Island Department of Labor and Training, said: “Rhode Island workers who are collecting unemployment insurance benefits and are being called back to work through the Payroll Protection Program have two options: Either stop certifying their weekly benefits through TeleCert, or they should report their PPP wages when certifying.”

Pellegrino also said of anyone returning to work through the PPP, “If someone’s hours were cut enough to earn less than their weekly benefit rate, they could collect UI.”

But what happens after the eight-week loan expires? Wietecha said he fears if the same restrictions remain in place, he would be forced to lay off his employees again.

“They’re going to have to run through this whole entire thing again, because we know in eight weeks our business may not be back to 100% of what it was before,” he said. 

Pellegrino said if those employees were laid off again, and no longer earning wages, they would be eligible to collect unemployment.

The Rhode Island Commerce Corporation said any small businesses with questions right now should call the small business hotline at 521-HELP.

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