12 Jul Jonathan Cartu Says: Who got PPP loans in San Diego? Everyone from dentists to
As the coronavirus pandemic worsened in March and San Diego’s economy suddenly went into lockdown mode, Karl Strauss Brewing Company quickly shed more than 600 of its 800 employees, closed its 10 brewpubs for dining in, and saw sales of its iconic draft beer slow to a drizzle.
Fast forward to today, and Karl Strauss expects that 225 of its employees will be back at work and eight of its 10 restaurants will have reopened by the end of the month.
Credit a more than $5 million loan it got via the federal government’s coronavirus relief program.
From dentists, law offices and construction companies to restaurants, hotels and even Comic-Con, the Paycheck Protection Program provides businesses with 500 or fewer employees loans that can be forgiven as long as the employer complies with certain conditions, key among them using 60 percent of the money to retain workers.
“When you see 90 percent of your revenue go away overnight and you’re staring down the barrel of so many fixed expenses like rent and electricity, we became so concerned about how long we could hold out,” said Chad Heath, vice president of sales and marketing. “Now this money gives us hope, that we can get through the coronavirus and come out of this a successful business.”
The Trump administration on Monday released a tsunami of data on the $660 billion Paycheck Protection Program. It came in two waves: loans from $150,000 to $10 million where establishments receiving funds were identified; and smaller loans under $150,000 where recipients remained anonymous.
In San Diego County, some 7,595 PPP loans fell into the $150,000 to $10 million range, with borrowers spanning the region’s economic and civic life.
The San Diego Symphony got a loan, along with 365 other local nonprofits. As the pandemic put the economy into a deep freeze, Congress specifically made nonprofits and faith-based organizations eligible for PPP funding. In all, 135 local churches received PPP loans of $150,000 or more.
Regional restaurant chains Rubio’s, Islands and Claim Jumper tapped PPP funds. So did 182 local law firms, including Procopio, Cory Hargreaves & Savitch, Tyson & Mendes and Higgs, Fletcher & Mack.
Showgirls of San Diego got a loan in the $350,000 to $1 million range and retained 33 jobs. Taylor Guitars, publicly traded SeaSpine Holdings and Adamis Pharmaceuticals, and private schools La Jolla Country Day, Francis Parker and Cathedral Catholic each received PPP loans greater than $2 million.
“As a nonprofit, La Jolla Country Day School is not immune to the significant disruptions and challenges of the COVID-19 pandemic,” said the school in a statement. “The goal of the Paycheck Protection Program is to keep our workforce employed … In this challenging time, we are carefully managing our school’s financial resources and looking for ways to reduce costs without impacting student development and furloughing employees.”
More than 200 local doctor’s offices, dental offices and medical clinics received the federal aid as their revenue evaporated following stay-at-home orders in mid-March.
“The Paycheck Protection Program was a godsend for our anesthesiologists,” said Dr. Andrew Zimmerman, president of the 265-doctor Anesthesia Services Medical Group, which received a loan exceeding $5 million. “With the sudden cancellation of elective surgeries, we saw a reduction in surgical volumes of more than 50 percent. The PPP funds we received helped soften the blow.”
A rocky start
For smaller businesses with loans under $150,000, nearly 44,000 establishments received funding in San Diego County, with an average loan size of roughly $35,000.
“It touched a lot of small businesses and nonprofits, and there have been a number of jobs preserved,” said Mike Sovacool, deputy director of the U.S. Small Business Administration for San Diego County.
According to the SBA data, 246,000 jobs were retained locally as a result of the PPP. But the data is incomplete. Thousands of loan recipients either left the “jobs-retained” field on the application blank or entered zero.
Meanwhile, some applications appear to inflate the number of jobs preserved. NTN Buzztime of Carlsbad, a publicly traded trivia game company that received a $1.6 million loan, listed 422 jobs retained on the application, according to SBA data. But the company’s annual report states NTN employed just 39 workers as of March 16 after laying off 35 employees in January.
Jobs retained data is not used to calculate loan amounts, which are based on a formula applied to average monthly payroll for 2019. PPP borrowers must document their payroll through tax forms and other records supplied to banks.
PPP got off to a rocky start. Rolled out in April within a week or so of congressional approval, the $349 billion first phase of the program had just 30 pages of rules when it launched. The flood of applications overwhelmed the SBA online electronic application system, which repeatedly crashed in the early days.
When the dust settled, large firms such as Shake Shack, Ruth Chris Steak House and the LA Lakers reported getting PPP loans while many small Main Street businesses failed to receive approval before the money ran out.
Under public pressure, Shake Shack, Ruth Chris, the Lakers and others big outfits returned their loans. Meanwhile, the $310 billion second round of the PPP program, launched in May, has delivered better access for smaller firms as the initial frenzy died down.
About $132 billion remains available to lend in the second round, which is set to expire on Aug. 8.
Nationwide, nearly 5 million firms have been funded. In California, 580,000 establishments with 500 or fewer employees received $68 billion in PPP loans. The bulk of the money, about $50 billion, went to the 87,000 firms with loans above $150,000.
“If you were denied in the first round because of the chaos, don’t be discouraged. Try again,” said Danny Fitzgerald, acting director of the San Diego and Imperial Small Business Development Center, which helps firms with financing. “Take advantage of it now because my guess is it won’t be extended past Aug. 8.”
How diverse were the recipients?
Though improved, the Paycheck Protection Program still has its critics. They contend too many loans are still going to well-connected or well-heeled establishments.
“The data that came out this week, as well as data that came out prior, has exposed significant issues that have raised a lot of eyebrows and significant concerns for taxpayers,” said Josh Knauer, an adjunct professor at Carnegie Mellon University and general partner at business advisory firm JumpScale. “As we get more data, we are going to see where this program failed.”
Relatively few PPP loans appear to have been made to minority- and women-owned businesses. While the SBA asked for gender and ethnicity data on the loan applications, it was a voluntary disclosure. Many applicants left those boxes blank. Fewer than a dozen San Diego County firms that received loans above $150,000 identified themselves as Black owned.
Donna DeBerry, head of the Central San Diego Black Chamber of Commerce, said limited outreach to Black businesses — plus historical hurdles around credit scores and “unbanked” households in minority communities — blocked many Black-owned firms from accessing PPP loans.
The chamber is raising funds on its own to aid Black businesses as they reopen. So far, it has raised nearly $500,000 towards its $1 million goal. The chamber has received roughly 500 applications, said DeBerry.
Who’s who of civic heavyweights
In San Diego County and nationwide, the economic damage from the coronavirus extends well beyond restaurants, hotels and tourism businesses. Lawyers, accountants and others who provide services to hard hit sectors also have been clobbered as their clients cut spending to focus on paying rent and keeping the lights on.
“Things (that clients) would normally need a lawyer for they are just putting off because they are really fighting for survival,” said Steve Cologne, managing partner of Higgs Fletcher & Mack. “And of course with the courts, trials that would normally get set by judges are being put off now until late 2021. There are going to be no trials this year at all.”
Professional, scientific and technical services firms were the largest business sector receiving PPP loans in San Diego County. Higgs, Fletcher & Mack received a $2.8 million PPP loan, which helped the firm retain all of its 150 employees at a time when some law offices are laying off or furloughing workers.
“We have not had to do that, and I think it’s because we have been very aggressive since this hit in March in reducing expenses and seriously taking advantage of opportunities like the PPP,” said Cologne.
From the beginning of the PPP program, the San Diego/Imperial Small Business Development Center partnered with The Nonprofit Institute at the University of San Diego to get the word out to charitable/civic organizations.
“Their Ph.D students, we turned them into business advisers for nonprofits, and they have been doing a great job,” said Fitzgerald, the acting SBDC director.
Local nonprofits receiving $150,000 or more in PPP loans reads like a who’s who of San Diego’s civic heavyweights. They include the Old Globe and San Diego Repertory theaters, Boys & Girls Clubs across the county, California Center for the Arts, San Diego Blood Bank, the United Way, several museums, Big Brothers/Big Sisters of San Diego County, Habitat for Humanity, and the Helen Woodward Animal Shelter, among others.
Several non-profit charter schools also received funding, as did the La Jolla Institute for Immunology and the J. Craig Venter…