Sonoma County small businesses rush for SBA loans to stay in business amid coronavirus pandemic

From bakeries to restaurants to breweries, cash-strapped small business owners across Sonoma County scurried to apply over the weekend for a slice of the $349 billion federal relief program to pay their employees, while they struggle to operate amid an economic shutdown caused by the coronavirus pandemic.

Small businesses are the economic engine locally and nationally, employing nearly half of private-sector workers. Congress and the Trump administration made the financial lifeline available through the Treasury Department starting Friday. The rollout was uneven, though, and some restaurateurs worry the bailout won’t ensure their survival.

Local bank officials said they were deluged with requests from area businesspeople eager to participate in the program backed by the Small Business Administration. Companies with 500 or fewer workers must apply to local banks and lenders that can provide a loan up to $10 million. As of Monday night, Santa Rosa-based Exchange Bank had received more than 700 applications, said Mike Sullivan, executive vice president.

If businesses use 75% of the borrowed money to cover payroll costs and the rest on mortgage interest, rent, and utility payments over eight weeks after receiving a loan, they won’t have to pay it back.

The federal windfall is targeted for small firms to retain their workers or rehire people they furloughed in recent weeks, as commerce ground to a halt during the virus-induced stay-home order here and across the country. Nonprofits, sole proprietorships, self-employed individuals, and independent contractors also are eligible.

However, many business operators are finding it’s much harder than anticipated to apply for the loans.

“Everybody is emotional and desperate, to be honest with you. We are getting inundated because we are a SBA lender,” said Brett Martinez, chief executive officer of Redwood Credit Union, which was able to successfully process its first loan application on Friday.

Like other local institutions, Redwood has limited the loans to current business customers to speed up processing and not overwhelm its lending staff.

“People need to be patient, and that is not easy when they are struggling in the situation they are in,” Martinez said.

Indeed, patience is minimal when the local and U.S. economy is bleeding profusely, and employers are shedding workers.

Nearly 10 million people nationwide have applied for unemployment benefits over the past two weeks. The first hard data on the local jobless picture will emerge on April 17 when Sonoma County’s March unemployment figures are released.

Anecdotally, it’s clear thousands of county residents are out of work, at least temporarily.

At Costeaux French Bakery in Healdsburg, President William Seppi said he was able to submit his application over the weekend, although he found the relief program’s rules complex even with his accounting background.

“This thing is supposed to be designed for small business and this is adding more stress in a stressful environment from a complexity standpoint,” Seppi said.

Seppi has furloughed about 80% of his bakery’s workforce of 116, halting retail operations with the exception of the one inside Big John’s Market. Costeaux’s sales to restaurants have dried up, too. The company is still selling its breads and baked goods to local grocers, he said.

The money will help him keep a skeleton crew on the job, but it’s unlikely to be enough incentive to recall workers, Seppi said.

Restaurants have been particularity hard hit by the county health officer’s stay-home order which began March 18 and will last at least through May 3.

Restaurants mainly subsist on current cash flow, which for now is whatever they can generate from takeout sales. Therefore, the SBA program’s focus on employee retention may not be enough to keep them afloat, local restaurateurs said.

“I expect there to be a large attrition rates for restaurants. ... They are typically operating month to month, as far as revenue. It’s always kind of a shell game with money coming in and money coming out,” said Matthew Williams of Sebastopol’s Ramen Gaijin, which furloughed 40 of its employees.

Williams has applied for a SBA-backed loan through Redwood to help launch to-go food service. He also is considering making an application for a separate $7 billion disaster loan through another SBA program.

U.S. Rep. Mike Thompson, D-St. Helena, said he has heard from restaurateurs, as well as their suppliers, expressing concerns the massive federal relief program’s structure does little to help them stay in business.

“This has been a major concern. There are not just a few restaurants in our district. There are a ton of them,” Thompson said. “We need to make sure we do everything we can to ensure that the restaurant community comes back strong when this is over.”

Some food service businesses have been better able to ride out the pandemic so far by the nature of their niche.

For example, 12 of the 13 Mountain Mike’s Pizza places operated by the Chandi Hospitality Group are still open. They are having success with a “contactless delivery,” meaning the driver maintains a 6-foot distance while delivering to customers, said Bhupinder “Sonu” Singh Chandi, president of the family-owned enterprise. His pizza parlors also are offering store pickup.

The bump in to-go pizza business has helped make up about half the business Chandi’s company has lost from indoor dining at Mountain Mike’s, he said. However, the company did let go about 60 people at its Bollywood Bar & Clay Oven and Beer Baron eateries in downtown Santa Rosa. He hopes to reopen both places once the shelter-in-place is lifted.

Chandi said the SBA money should keep his pizza business going, until he can eventually reopen his downtown restaurants.

“As soon as the normalcy comes back,” he said, the federal program can help “make sure the businesses are able to kickstart.”

Editor’s note: Story has been updated to clarify that Chandi Hospitality Group operates the Mountain Mike’s franchises.

You can reach Staff Writer Bill Swindell at 707-521-5223 or bill.swindell@pressdemocrat.com.