Main Street Pillars: How Some US States Have Used Crisis Lending

(Reuters) – As the coronavirus crisis gripped the U.S. economy and Congress approved hundreds of billions of dollars in emergency small business loans, Utah builder Clark Ivory knew what tell his local colleagues.

FILE PHOTO: Empty restaurant tables sit in a Pennsylvania Avenue plaza during the coronavirus outbreak in downtown Washington, United States, March 31, 2020. REUTERS / Jonathan Ernst / File Photo

Take the money. Keep your employees. Be prepared to invest when the pandemic passes.

To those who said they had enough money to wait until the crisis was over, “I said you were crazy,” Ivory, CEO of Ivory Homes, told a recent webinar at the David Eccles School of Business at the University of Utah.

“Use this money now, and why?” You don’t have to use up your savings. And the following year, that building that you were planning to start? This is what will help the Utah economy.

People apparently listened. Reuters analysis of Small Business Administration data shows Utah, along with core manufacturing powers and major political battlegrounds like Ohio, Pennsylvania and Wisconsin, have exceeded their weight in the race to get $ 349 billion “Payroll Protection Program” loans that ran out of money in less than two weeks.

A comparison of the composition of local industry and the wage bill with national averages indicates that important sectors in a handful of places – manufacturing in the heart of the country, construction and oil and gas in the West – have come together quickly and helped their states to receive billions of dollars more than otherwise expected. Utah, for example, received about $ 600 million in SBA loans over and above what would have happened if its businesses had borrowed at the national average.

Another $ 310 billion tranche is expected to be authorized by Congress on Thursday after first-round complaints failed to reach the nation’s most fragile businesses – local restaurants, artisan shops and bespoke retailers who distinguish the main streets of the country.

(GRAPHIC: A winning small business in Heartland -)


Nonetheless, it apparently touched the industrial heart of the country, and it may have had as much to do with organization and networking as size.

In the Utah case, when top executives like Ivory applied for their own loans – in his firm’s case for $ 2.7 million to continue paying 181 employees – they also recruited lawyers and volunteer accountants to help small businesses, including major suppliers and contractors, get ready for payback.

In Indiana, with a strong manufacturing presence, small businesses overall received about $ 1.2 billion more than if their industries had borrowed the same share of the payroll as domestic businesses.

One of them was Holder Mattress Co, with 73 years of business and a strong network of local relationships. Its accountant is one of the founders of the local Community First Bank in Kokomo, and some of the bank’s executives are members of the Rotary Club alongside Holder President Lauren Taylor.

Getting a $ 100,000 SBA loan wasn’t easy, said Taylor, the company’s founder’s granddaughter. But it happened, and “We will use the money to cover eight weeks of payroll, payroll taxes, health insurance and our IRA plan,” she said. “That will leave us a little bit to pay some utility bills. “

The initial tranche of PPP loans included 1.2 million loans of less than $ 150,000 and totaling approximately $ 58 billion. The average of $ 47,000 per loan indicates that the group was focused on smaller borrowers.

But the initial money quickly ran out, leading to complaints. The hardest hit sectors in the country, especially small businesses like restaurants, have been left behind.


A recent analysis by Goldman Sachs suggests another potential dynamic at work.

The catering and hospitality industry, although hard hit by the pandemic, is a relatively low-paid sector. Many workers would earn more by receiving increased unemployment benefits by an additional $ 600 per week during at least the initial phase of the coronavirus crisis.

Based on pre-crisis employment levels, it appears hotels and restaurants borrowed less than expected from the SBA. But they also laid off more than 440,000 workers in March alone, and Goldman found that hotels and restaurants actually ended up borrowing the highest percentage of any industry of spending eligible for cancellation. of the loan.

This includes spending on payroll, rent, and utilities, essentially turning the funding into a government subsidy. The remainder is repaid at an interest rate of 1%.

Sectors largely spared by closures, primarily information technology, finance and others with white-collar workers who can more easily do their work remotely, have seen only a small decline in the total number of workers. hours worked, Goldman found.

Tech workers actually worked longer hours as the demand for software-based delivery and conferencing skyrocketed, and companies in these industries borrowed less, which may be why states like California, with a high concentration of technology, seemed to lag behind in participation in P3s.

Manufacturing and construction also stood out, Goldman noted. Construction companies borrowed nearly $ 45 billion, or about 64% of reimbursable expenses compared to a national average of about 46%; factory owners borrowed about 54%.


Although the SBA did not show borrowing by industry in every state, comparisons of industry intensity and payroll size do allow some conclusions to be drawn.

Small construction companies in Utah, for example, employed more than 70,000 people, according to a 2017 US Census Bureau survey, the latest available – a level about 30% above the national standard given the size of the company. Utah’s overall small business workforce.

The same is true of the Rust Belt manufacturing sector, where the relative intensity of factory employment matches the success of PPP borrowing for states like Ohio, Pennsylvania and Wisconsin. According to Reuters analysis, Ohio and Pennsylvania received about $ 2 billion each above national averages. Wisconsin received about $ 1.7 billion more than average.

Ivory, who served on the board of directors of the Salt Lake City branch of the San Francisco Federal Reserve from 2006 to 2011, said his mobilization was not over.

This week, he said, as the next round of SBA funding took shape in Congress, he asked his purchasing team “to call all the subcontractors and suppliers and tell them: “Have you been successful with the PPP and if not, where are you now? “… What can we do so that you can be prepared?”

“It’s not something we do without commitment. Don’t take the PPP and don’t miss it. Spend it to maintain a job base and feel that you are going to invest to be able to move forward.

Report by Howard Schneider in Washington; Additional reporting by Timothy Aeppel in New York; Editing by Dan Burns and Paul Simao

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