Biz community seeks expansion of grant program

  • Businesses across Alaska are reopening with many having received federal aid through the Paycheck Protection Program or other Small Business Administration aid. A new state grant program utilizing federal funds currently prohibits businesses who have already received federal aid from qualifiying for it. (Photo/Marc Lester/Anchorage Daily News)

Lawmakers are looking for ways to expand the number of small businesses that can qualify for $290 million in COVID-19 aid just as the state’s program set up to disperse the funding is getting up and running.

Anchorage-based Credit Union 1 began taking applications from small businesses for pandemic relief grants June 1 through the AK CARES program that is being administered by the Alaska Industrial Development and Export Authority, the state’s development bank.

At the same time, legislative leaders were in discussions with officials in Gov. Mike Dunleavy’s administration on ways to reverse limitations on eligibility for the grant pool codified only a few weeks ago when the Legislature briefly reconvened in Juneau to appropriate pandemic aid funds on May 20.

The $290 million available to small businesses through AK CARES is part of the roughly $1.5 billion of federal money allocated to the State of Alaska through the federal CARES Act approved in late March by Congress and President Donald Trump to help businesses and individuals impacted by the economic restrictions imposed to limit the spread of COVID-19.

When Dunleavy administration officials began writing the rules for the AK CARES program in late April they excluded small businesses that had already received some sort of federal pandemic aid from being eligible for the state program — seeded with federal money — in order to spread assistance to as many businesses as possible.

But state officials and lawmakers have since heard from many small business owners that they need to be able to get help at both the state and federal levels to survive, and even that may not be enough for some.

As it stands, Alaska-based and operated small businesses, sole proprietorships and many nonprofits that employ 50 or fewer full-time employees that have not received other federal COVID-19 aid can apply to Credit Union 1 for AK CARES grants between $5,000 and $100,000, according to a checklist provided by the state Department of Commerce, Community and Economic Development.

Credit Union 1 was chosen to lead the program through a competitive bidding process that will be reopened soon for other lenders interested in assisting with grant administration, according to AIDEA spokesman Karsten Rodvik.

The grants can be used to cover payroll; utilities; rent or mortgage payments; personal protective equipment; re-opening expenses and short-term loan payments or credit debt incurred as a result of the pandemic, according to the Commerce Department.

Marijuana businesses, those that are a secondary source of income for the owner and businesses that have previously filed for bankruptcy are not eligible for AK CARES grants.

Alaska Senate President Cathy Giessel said in an emailed statement that the Senate is “deeply concerned” about the availability of grants to small businesses and is working with administration officials to expand eligibility for AK CARES.

“We must ensure Alaska small businesses receive this money as soon as possible,” Giessel said.

House Majority coalition spokesman Austin Baird similarly wrote in an emailed response to questions that House leadership wanted to expand the pool of businesses eligible for AK CARES assistance when the total $1.5 billion was appropriated in late May, but the Legislature ultimately decided to approve it with the administration’s sideboards rather than delay the release of the funds.

Giessel believes the rules can be amended administratively or through the Legislative Budget and Audit Committee and will not require the Legislature to reconvene.

The Budget and Audit Committee generally handles fiscal matters when the Legislature is not in session.

House leaders are less confident that a legal fix to the issue can be made as easily, but lawmakers are consulting with the Legislature’s attorneys on a possible remedy, according to Baird.

Dunleavy spokeswoman Lauren Giliam wrote in an email that the governor wants to see eligibility for the AK CARES program expanded and it was limited because the rules were drafted when the PPP loan fund was depleted.

“There were many Alaskan businesses that had not been able to access federal funding, so the program was structured to ensure access to some type of relief for as many businesses as possible,” Giliam wrote.

She also noted that while the rules currently restrict access to AK CARES funds, local governments can still use their federal CARES Act funds to provide similar small business aid.

It’s unclear exactly when the issues might be resolved but Anchorage Economic Development Corp. CEO Bill Popp said many small business owners need all the help they can get as soon as they can get it.

“We have thousands of businesses that are in a cash crunch right now,” Popp said.

He emphasized that grants are necessary because even low-interest loans put businesses at a significant disadvantage at a time when cash flows are uncertain to nonexistent.

And while Dunleavy has lifted most of the state’s health mandates and allowed all businesses to reopen, the customers are not always returning.

“Consumers are not flocking to businesses like they have before,” Popp said.

He cited an April survey by AEDC of more than 250 business owners that found 38 percent of those surveyed feel it is likely or possible that they will go out of business soon.

“Even with all this assistance a lot of businesses are going to go away,” Popp said.

Anchorage Chamber of Commerce President Bruce Bustamante largely echoed Popp’s sentiments, adding that he’s hearing from business owners concerned that the assistance isn’t being made available quickly enough for some to survive.

“If you’re a business in trouble you need cash immediately,” Bustamante said.

Through May 30, the federal Small Business Administration had processed 10,135 Paycheck Protection Program loans in Alaska totaling just more than $1.2 billion, which was just 95 more loans than had been handled a week prior, according to SBA figures, indicating demand for the program is dwindling.

The vast majority of PPP loans are expected to convert at least partially to grants as long as businesses apply the funding to qualifying expenses, such as payroll, utilities and rent; 75 percent of the loan amount must be spent on payroll in order to be converted to a grant.

Alaska had nearly 72,000 small businesses in 2018 that accounted for 99.1 percent of all Alaska-based companies according to the SBA.

Michael Huston, chief lending officer for Northrim Bank said the Anchorage-based lender, which has processed more than 2,400 PPP loans, has had to decline a “pretty small number” of PPP applications, mostly for businesses that either didn’t qualify for the program or had incomplete or dual applications through other lenders.

Without firm numbers, Huston estimated Northrim has denied less than 5 percent of PPP loan applications.

Credit Union 1 received 470 AK CARES applications in the first day of the program, according to spokeswoman Jessica Gallagher.

Elwood Brehmer can be reached at [email protected].

06/03/2020 - 10:04am