In mid-March, Alaskan businesses and non-profits became eligible to apply for federal economic disaster loans. And, because the true economic cost of the coronavirus pandemic hasn’t yet become clear, the U.S. Small Business Administration is allowing people to apply for loans through December.
Even though it’s the off-season, some cruise-related business owners need the help now.
The summer of 2020 was supposed to be spectacular for Southeast Alaska’s economy. Nearly 1.5 million visitors were supposed to spend roughly $800 million supporting thousands of regional jobs and hundreds of companies.
But the coronavirus pandemic brought all of that to a screeching halt.
And now, people like Midgi Moore are hemorrhaging money. She runs Juneau Food Tours. Her husband runs a sport fishing and whale watching company. Ever since the cruise season stalled, people have been cancelling their vacations in droves — that means, they want their deposits back.
“You know, I’m looking at several, probably $5,000 – 10,000 in refunds. But my husband is looking at tens of thousands of dollars of refunds. So those loans are not to help us stay in business, it’s to pay back people who aren’t coming,” Moore said.
Generally, the cruise season runs from May through September, but the smaller companies spend the early months of the year gearing up for the season.
Moore said they use funds people pay in deposits to keep the businesses running in the off-season and to ramp up during the shoulder season. Usually they’d be hiring.
Instead, her husband had to lay off 19 people. She laid off 10. This year has turned into something of a worst case scenario.
“We’re at the point where we don’t want to look at our phones or check our emails because we’re terrified that it’s a request for a refund,” she said.
This story is playing out for small businesses owners who rely on the visitor industry all over the state.
Before lawmakers left Juneau, John Bittner of the Alaska Small Business Development Center told a Senate Finance committee that between coronavirus-related shutdowns and the dramatic drop in oil prices, the state’s economy is taking a beating.
“To be honest, this is such a wide ranging economic upheaval that every industry in the state is going to be negatively impacted in some sense, with a handful of exceptions,” he said.
He said the federal small business loans could help keep some of them afloat.
“This will help. It’s not a silver bullet. Not everybody will be eligible but this is a step in the right direction,” he said.
On offer is up to $2 million in low-interest loans to small businesses that can be used for things like payroll and paying bills that cannot be paid because of the coronavirus outbreak.
The interest rates are low: 3.75% for small businesses and 2.75% for non-profits.
Rick Jenkins is a spokesperson for the disaster assistance program at the Small Business Administration. The economic injury disaster loan isn’t a new program, but he said this is a new scenario.
“It’s the first time in our history that SBA [has] been able to declare an event such as this,” Jenkins said. “So when H1N1 — or the swine flu — was sweeping the country or the HIV epidemic — and they impacted businesses — SBA couldn’t step in with disaster loans. Now, they can.”
One other difference is that normally the loans are the result of disasters that are confined in some way: fires, earthquakes, hurricanes. Typically they impact a few states at a time. But in this case, these loans are available for the whole nation.
Still, a loan won’t be the best option for all small business owners. Jenkins said there are counselors at the state’s Small Businesses Development Center that can help with those decisions.
Moore said she heard about the program and applied online. She said it’s complicated for those without a strong financial background. There’s some lingo that’s not easy to understand, and she’s a little nervous she didn’t do it right. But she didn’t have to collect a lot of paperwork or tax documentation. She just linked last year’s return to her loan application and that made the process a lot easier.
It took more than 4 hours for her to get through the process.
“And this is not SBA’s fault, but I am certain that pretty much half of the United States is applying and the system — the website — it just keeps shutting down, it’s crashing,” she said.
Right now, Moore has all of this anxiety about her business because it’s just not clear how she’s going to make a living this year. But, there have been these moments of joy in the last few weeks.
When people reach to tell her that they’re cancelling their trips, she’s been asking them to consider leaving their deposits with her, turning them into essentially gift cards.
This guy in Florida reached out. He’d paid about $500 in advance and he’s not coming until next year. At first, he told her he wanted his money back. But after they emailed back and forth a few times, he asked her how she was doing.
“I was just really frank with him, I said I’m struggling. I said I’m really struggling. Of course, no one in any way shape or form could have predicted something like this being so global,” she said.
She also explained to him that her whole operation was coming to a screeching halt, and that not only was she going to make zero money, she also has to give back the money she already has.
Pretty soon, she gets another email.
“He goes — I would like to buy a gift card for $1,000,” she said. “I, of course, burst into tears. And I was like, ‘oh my gosh not only are you buying your tour but you’re paying and additional $500 just to be a nice person.’ And, I emailed him back and I said that is just so generous. And he goes, ‘we need to help one another.’”
There might be some other help on the way for businesses like Moore’s. The federal CARES act that just passed — that’s the massive $2 trillion dollar coronavirus aid bill — it gave SBA access to $350 billion in loans for small businesses.
They can be used to cover things like operating costs or employee expenses like payroll, healthcare premiums and vacation or sick leave.
There’s also a loan advance option — that could get up to $10,000 to people like Moore within three days of applying. She applied for a loan on Monday and hopes to get it and maybe use it to pay rent, by the end of the week.
