Laurel Hess and her husband are now on the verge of losing their business and potentially their home and life savings, all while government-promised aid has yet to arrive.
For two decades, Laurel Hess and her husband Eric lived the so-called “American Dream.” They launched their own successful business, bought a two story colonial-style house in a nice, quiet, middle-class neighborhood in Canton, Michigan, and raised a family in that home.
The couple has never been wealthy. They don’t own a cottage Up North like many other Michiganders and the Town and Country minivan they drive has close to 300,000 miles on it. But they still considered themselves blessed to have their home, their family, and their business.
They felt this way as recently as March. Now, less than a month later, everything they’ve worked for is at risk. Hess and her husband are among the tens of millions of Americans on the brink of financial collapse because of the coronavirus pandemic.
When the coronavirus outbreak began to spiral last month, the couple was forced to close their business, Jungle Java. The indoor children’s play center, also located in Canton, about 35 minutes west of Detroit, includes a cafe that serves coffee, sandwiches, snacks, and other specialty drinks. Jungle Java is not considered an “essential business” and had to shut its doors after Michigan Gov. Gretchen Whitmer issued a stay-at-home order on March 23.
The writing was on the wall before that order, though, Hess said. In the 10 days preceding Whitmer’s order, Jungle Java lost more than a dozen events to cancellations. With those cancellations, Hess and husband lost $20,000 in business.
“Her shutdown isn’t what killed us,” Hess told COURIER. “It was the fear before the shutdown. Nobody was going to come to businesses like ours anyway.”
The Hesses are now on the verge of losing their business and potentially their house and life savings, all while government-promised aid has yet to arrive.
“It’ll be a month this week since we were shut down and not one single promise of ‘We’re going to help you out’ has materialized, even though we’ve been on top of every application from the minute they opened up,” Hess said.
They opened their business, which Hess described as “Chuck E. Cheese meets Starbucks,” in Canton in 2003 and it has been the family’s single source of income ever since. Jungle Java also has two other locations in Michigan, in Farmington Hills and Clinton Township, both of which are independently owned and operated by other people.
“It’ll be a month this week since we were shut down and not one single promise of ‘We’re going to help you out’ has materialized, even though we’ve been on top of every application from the minute they opened up.”
Hess and her husband are the exact sort of small business owners the federal government had in mind when it passed the “Coronavirus Aid, Relief, and Economic Security Act” or the “CARES Act,” on March 27. The $2 trillion relief plan, the largest bill emergency aid package ever passed into law, included $349 billion in forgivable loans to help some of the 30 million small businesses in the U.S.
This effort, dubbed the Paycheck Protection Program, was designed to provide businesses with fewer than 500 employees fully guaranteed, forgivable loans of up to $10 million for operating expenses.
Sounds great, doesn’t it? Hess thought so at first, too. “There was all this excitement about help,” she said. “We were like ‘We’re going to be OK.’”
But as she quickly learned, the Paycheck Protection Program is not the cure-all many had hoped for. The program, offered through the Small Business Administration and its partner banks, sputtered out of the gates as the SBA worked through technical issues, questions about what costs the loan will cover, overwhelming demand, and confusing bank guidelines about who can apply.
By Thursday morning, less than two weeks after the program opened on April 3, the program had all but run out of money and stopped accepting applications. “The SBA is currently unable to accept new applications for the Paycheck Protection Program based on available appropriations funding,” the agency said in a statement on its website.
The SBA and its lending partners have approved more than $339 billion in loans across more than 1.6 million approved applications so far, but the Hesses’ application is not one of them. Lawmakers are seeking to direct an additional $250 billion into the PPP, but have been unable to reach an agreement thus far. Those squabbles perfectly encapsulate the disaster that has been the PPP.
Hess and her husband applied for PPP online through their bank, Bank of America, as soon as they could on April 3 and received an email instructing them to await further instructions on how to upload “supporting documents.” But that email never came. Instead, a Bank of America employee called the couple a week later and informed them that they had still yet to submit documents.
“We told him that we had not yet gotten the email on how to submit them,” Hess said. From there, the employee directed the couple to another web page to upload their supporting documents.
“We sat here for hours on Friday trying to figure out how to apply, because it’s asking you questions that you don’t even know what documents they’re asking for,” Hess said. “It’s so incredibly difficult—even as a college-educated business owner—to wade through 27 pages of paperwork … It’s not real easy, but we were able to get through it.”
Hess said completing this second set of paperwork felt like “virtually starting over again,” and worries it delayed their ability to receive a loan. Even if Congress approves additional funding, Hess’s experience has left her nervous that she’s going to run into even more roadblocks and may never see a dime from PPP.
Even if the couple does receive a loan, it would only provide a minimal amount of help. Under the PPP, the loans for small businesses are only forgivable so long as the companies use 75% of the loan to keep their employees on payroll—or rehire workers they laid off—for eight weeks.
That math doesn’t add up for Hess’s business. The maximum amount businesses can receive is capped at 2.5 times the company’s monthly payroll, which at Jungle Java is about $35,000. But Hess and her husband also spend $10,000 a month on rent for their massive indoor playscape and are prohibited from spending more than 25% of the loan on rent, utilities, or other business expenses if they want to receive loan forgiveness.
Hess said she would much rather spend that money on rent, adding that she expects her landlord to demand payment even for the months they’re closed. “He’s got three or four strip malls and if nobody pays him his rent, what’s he supposed to do? He’s got to pay the bank, so I feel for him as well.”
After being forced to shut down their business in mid-March, Hess and her husband were unable to pay their April rent and don’t plan on paying for May either, even though not doing so puts them at serious risk. The couple renewed a 10-year lease in August 2019 and had to agree to a two-year personal guarantee, which means their landlord can come after their personal assets if they fail to pay rent under the terms of the contract.
“There’s no way I can pay him rent and if he wants, he can take my house, he can take my car, he can take most of my life savings that’s not in retirement,” Hess said.
This stark reality is one facing many Americans. In recent weeks, story after story has emerged highlighting the devastation being visited upon small business owners and workers alike. Roughly 22 million Americans have filed for unemployment since the coronavirus pandemic began shutting down the economy.
This strain on the unemployment system is exactly why the forgivable nature of the loans is linked to payroll—to incentivize companies to keep workers on staff and lessen the burden on state unemployment systems. But Hess said this clause renders the PPP more or less useless for her.
Jungle Java employs mostly low-wage workers, all of whom she had to let them go in March when her business shut down. But due to the CARES Act’s expansion of unemployment benefits by an additional $600 a week, those workers now qualify for benefits that pay them more than their old jobs.
“I’ve got a couple of managers that make $14-15 an hour here and they’re able to collect unemployment,” Hess said. “They’re going to be better off staying safely in their homes making almost $1,000 a week than coming back to work for me.”
Hess doesn’t oppose the unemployment expansion; she and her husband also have applied for that aid, though they’ve yet to receive their benefits. Instead, she said lawmakers also need to pass legislation enacting rent relief.
“Rent is my hugest bill. I just feel morally like I shouldn’t have to pay it when I can’t even be in there operating my business,” she said.
There has yet to be any serious proposal on rent relief in Michigan or at the federal level, but unless rent forgiveness is enacted and covers several months, Hess isn’t sure whether Jungle Java will survive. The business is closed through at least April 30, and she doesn’t anticipate being able to reopen until mid-May or the beginning of June at the earliest.
Even when they do reopen, she knows that they would likely operate at a loss for many months to come. “Even if I get forgiveness for April and May and I’m allowed to open on June 1, people aren’t going to flock into all these businesses for a very long time,” she said. “People are still going to be social distancing enough where they’re not going to be frequenting a business like mine … I don’t think we’ll know until next winter if we’re able to get through this or not.”
Hess’ long-term concerns aren’t alarmist by any means. Michigan has been one of the hardest hit-states in the nation with more than 29,000 confirmed cases of COVID-19 and 2,093 deaths due to the virus. The state has the fourth highest number of cases and the third highest number of deaths in the country. The state is also currently under one of the nation’s strictest stay-at-home orders lasting through at least April 30.
Hess said she and her husband sensed the PPP might be a mess, so they also tried other avenues to obtain help. They applied for the Small Business Administration’s Economic Injury Disaster Loan Emergency Advance, which would provide up to $10,000 in advance and does not have to be repaid, unless the business also receives a PPP loan, in which case the advance would be deducted from the loan forgiveness amount of any PPP loan received.
“It’s supposed to be a way to get $10,000 real quick,” Hess said. The SBA told small business owners they’d receive their advance within days of filing their applications, but Hess has yet to hear anything more than two weeks after applying for the program.
They also applied for the Michigan Economic Development Corporation’s Small Business Relief Program, which was set to offer up to $10 million in grants and another $10 million in low-interest loans to businesses directly impacted by COVID-19. The Hesses applied for a grant of up to $10,000 on April 1, the first day applications were accepted.
“I made my husband stay up until 12:01 a.m. I said ‘Just get it in, because you know it’s going to be first come first serve,’ so we were one of the very first people to get that in on April 1 and supposedly you were going to hear from them within a week,” Hess said. “We haven’t heard anything.”
She added: “You fill out these applications and they go into the ethers and you don’t even get a confirmation saying your application has been received.”
Applications for the program closed on April 6 and Hess said a representative at her local chamber of commerce told her the applications were reviewed last Friday and they “should hear something this week.”
These experiences have left Hess dejected and unsure what comes next for her family or Jungle Java.
“All my friends are like, ‘Oh they’ve got all these great programs, you’re going to be fine,’” Hess said. That has not been the case. “It’s been a month and we’re not even close to seeing a dime.”
Hess has done everything she was supposed to and feels as if the government isn’t living up to its end of the bargain.
“I just feel like it’s a lot of talk. Every time there’s a press conference, whether it’s our president or our governor or even our county officials, they’re talking about how ‘We’re doing this and we’re doing that,’ but it’s really all a lot of talk until the money hits.”