Home Business Small businesses wary of government loans, face loss of income

Small businesses wary of government loans, face loss of income

by Nevada State News

By Lucia Starbuck
Originally published on ThisisReno.com

Small business owners across Nevada convened virtually to talk about the impacts of the COVID-19 pandemic and how long they estimate recovery will take.

Democratic Nevada Lieutenant Governor Kate Marshall hosted the digital roundtable over the weekend. The event was organized through Democratic presidential candidate Joe Biden’s campaign, though Biden did not make an appearance.

Businesses that rely on tourism take a hit

Abbi Whitaker is the owner of the Abbi Agency, a marketing and public relations firm that represents clients across Nevada, including Travel Nevada, Mammoth Brewing Co., North Lake Tahoe and Henderson Now. With travel advisories put in place and tourism coming to a screeching halt, Whitaker is facing a loss of income and initially had to lay off a third of her 30-person staff.

“When COVID-19 kind of really took hold, I did have to do some pretty immediate, quick layoffs because about 50 percent of my business is tourism focused,” Whitaker said. “We were immediately hit, and grappling with, ‘How do we maintain our business, maintain the employees that we can and how do we get through this, and deal with it?’ So, just trying to figure out, as the rest of the small businesses in the great state of Nevada, how we can survive the next few months, and then, survive the next few years as well.”

Whitaker said she received a U.S. Small Business Administration (SBA) loan from the Paycheck Protection Program (PPP) and was able to hire the staff back on, but she worries that the loan will hurt her in the long run.

Abbi and Ty Whitaker of the Abbi Agency.

“The rules are vague,” she said. “What I’m most fearful of now is that, in a year, they’re going to turn around and say, ‘Well, no, you didn’t follow the rules exactly, even though you don’t know what they are, Abbi, and now you have to pay back all that money.’ That’s going to put me $200,000, $300,000 in debt. I don’t want to go in debt. I already have enough of that. I don’t need any more. I’m scared, to be honest.”

SBA loans will be fully forgiven as long as 75 percent of the funds are used to keep all employees on payroll for eight weeks and the remaining funds are put toward rent, mortgage or utilities, according to SBA’s website. Business owners must apply to get the loan forgiven, by showing that the funds went to the appropriate payrolls.

If 75 percent of the SBA loan is not used toward employee payroll, the money that was not used toward employee payroll will have to be paid back. The loan payments will be deferred for six months, and then business owners will have two years to pay back the loan with one percent interest.

Tim Haughinberry is the owner of Black Bar USA, a beverage marketing, consulting and promotional company, located in Las Vegas. He said with event and convention cancellations, he has lost 100 percent of his business. 

“If you walk into a liquor store, and you see somebody sampling new product, or if you go to one of the big pools in Las Vegas and there’s girls in bikinis, and they’re doing big parties and events, that’s what my company does nationwide. So, the second the industry shut down, my company shut down as well,” Haughinberry said. “So, we’re affected long term because, in our business, they won’t be getting back for at least three to four months because everybody’s sitting on inventory. By the time they start purchasing again and the wheels start turning, then a company like mine is needed. We probably won’t have any business until December, even if the key was turned tomorrow.”

Haughinberry shared Whitaker’s concerns about the SBA loans. 

“I got the PPP. Once it was done for me, I had two months of salary and utilities, and then I told my accountant, ‘Send the rest back because I don’t know what they’re going to do,'” Haughinberry said. “I don’t trust the government, sorry, when it comes to my money. So we stopped right there.”

Struggling to reopen and frustrations while remaining closed

Under phase one of Gov. Steve Sisolak’s reopening plan, hair salons and barbershops are allowed to reopen their doors. Lamar Robertson is the owner of Haircutz Don’t Lie Barbershop in Las Vegas. He said he has been closed since March, but he still had bills to pay.

“We still had to pay the bills and everything. My landlord didn’t give me any breaks. He still wanted his rent,” Robertson said. “I still had to pay pretty much $6,000 over the two months that we were closed, and I made no money at all.”

Robertson said he did not receive any SBA loans. He also said that he’s accrued more bills after reopening his shop about two weeks ago. He said he paid to put dividers in between the chairs in his barbershop and provide personal protective equipment.

Robertson said after opening up, business hasn’t quite bounced back. 

“With us having to be so close to do our job, some people are still afraid,” Robertson said. “Two of my barbers didn’t come back because they have wives, they have other complications. So, they’re afraid to touch people and then go home to their family, and possibly bring something home.”

a hairdresser dries a client's hair while wearing a mask
Stylists returned to work at Reno’s Salon Platinum during phase 1 donning masks in order to ensure health and safety. Image: Eric Marks

While some businesses in Nevada are paying to stay afloat while reopening, other businesses still are not even allowed to open their doors yet. Mena Spodobalski is the owner of EVOKE Fitness Training Facility. Gyms and fitness centers are ordered to remain closed through phase one of Sisolak’s reopening plans. 

“When we went in phase one, I think that day I sat in my backyard and cried probably for 20 minutes because I really thought that we were going to be able to be in that phase,” Spodobalski said. “I just realized, we just have to, like, hang in there just a couple more weeks. I know that there’s been a lot of people who have opened up against the rules, but we just felt like our clientele’s health and our employees’ health are far more important than making a couple extra bucks in two weeks.”

This Is Reno reported that the City of Reno has been seeing some businesses reopen without being permitted to do so.

Sisolak announced what phase two of his reopening plan will look like Tuesday night May 26, but it doesn’t help with the loss of income Spodobalski has been facing for the past two months. 

“We are a private gym. We don’t have monthly fees. They come in for a session, they pay for that session. So, if clients don’t come in, we don’t get paid,” Spodobalski said. “The bills are still waiting to get paid. The lease payments, we’re still expected to pay. It has been very tough. We expected a drop, obviously, but we also were thinking, ‘Two, three weeks, we’ll get through this. Everything will be great.’ It’s been nine weeks now, of being closed. The first month we lost 60 percent of our business. The second month we lost 85 percent, and now about 93 percent of our business has been lost. It’s something that we’re never going to be able to earn back.”

Spodobalski said she has eight independent contractors working for her who have been impacted as well. Independent contractors can apply for Pandemic Unemployment Assistance, but there have been delays in the system.

Some small businesses in Nevada have had to close their doors completely. 

StoneyHead Brewing Co. Craft Brewery & Tasting Room announced on their Facebook page today that they will be closing due to the impacts of the COVID-19 pandemic. The brewing company has been around for eight years and their last day will be June 13, 2020.

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