Payroll Loans Are Forgiven, But Salons Worry About Labor Challenges And The Upcoming Delta

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When Denver’s Deseo Salon and BlowDry were forced to close for two months in 2020 due to the coronavirus pandemic, owner Sherri Velard didn’t know what the future holds.

Like hundreds of thousands of businesses in Colorado, Velarde applied for a federal loan from the Payroll Protection Program, a popular COVID-19 relief for small businesses. If the loan was used to pay workers, it was subject to 100% forgiveness. She said that the application process went smoothly and there were no obstacles.

“I have a relationship with my bank, as well as with the bankers there, and so they have a pretty good relationship,” Velarde said.

Deseo Salon & Blowdry owner Sherry Velard rinsing a client’s hair on Wednesday, August 18, 2021 in Denver. Velarde founded Deseo in 2015 and is struggling to recruit new staff as the pandemic continues, although stylists and front desk workers are being paid handsomely, Velarde said. “People just don’t come for interviews.” (Olivia Sun, Colorado Sun)

But in addition to utilities and rentals, Velarde spent most of the $ 120,000 loan marketing to new clients and trying to attract new stylists in what has become a competitive job market. PPP rules have evolved over time, allowing business owners to spend more money on non-wage items.

“To be honest,” she said, “we couldn’t get people to return (to work). It was crazy. “

MORE: More than half of Colorado’s $ 15.1 billion check protection loans have been forgiven. Here is a list

The economy recovered significantly last year as the number of jobs increased and unemployment declined steadily. Nearly 150,000 small businesses in Colorado received PPP loans, and about a third of those same companies applied for a second loan. This helped inject $ 15.1 billion into the state’s economy and keep 1.6 million workers employed, at least temporarily.

But the PPP funds were supposed to last only two months, and the pandemic lasted much longer. Throughout the year, small businesses face new challenges, from the challenges of finding enough workers to tackling the growing variant of the coronavirus delta.

Colorado’s economy has made progress over the past year and the state’s gross domestic product is expected to increase. achieve full recovery by the end of the year… The unemployment rate fell to a pandemic low of 6.2% in July, although federal unemployment benefits continue to receive more than 100,000 Colorado residents, ending September 4. According to the US Department of Labor, 943,000 jobs were added nationwide. to the market, and the unemployment rate fell to 5.4% last month.

“We have done an amazing job in the last 12 months or so, but what will be a problem for us in some way over the next 12 months is anyone’s guess,” said Kishore Kulkarni, professor of economics at Metropolitan State University. Denver. “But in a sense, the effect of this delta variant will not be close to the effect of the first shock wave.”

>> Search all approved and written off Colorado loans

Working with delta

Michaela Cox, owner and sole employee of Suite Spa in Aurora, said she had to temporarily close the spa last year due to the coronavirus pandemic.

While she has found a way to survive this new normal, she fears that the emergence of coronavirus variants will stunt all of her progress. The delta option makes some of her clients worry about visiting a business where close contact is required, and the business has slowed down as a result.

“I’m still trying to recover from everything that happened, and then we got a new delta option, you know, and this is a completely new thing that I need to worry about, it kind of slows down the process,” Cox said. …

In particular, beauty salons and spas have been particularly hit by business closures due to COVID-19 and social distancing. According to public figures provided by the Small Business Administration, 4,510 beauty salons in Denver received more than $ 22 million in PPP loans in 2020 and 2021. As an industry, beauty salons ranked fourth in the number of PPP loans in both the first and second. loan rounds.

Cox was grateful for the $ 3,821 loan she received last year, but would like it to help with other expenses. Cox also said the government should have simplified the application process for small businesses.

“I mean, it was not easy at all. I would say it kind of made you feel like there is a trick to even get a piece of something, ”Cox said of the PPP application.

With little guidance on how to apply for a loan, Cox turned to Facebook groups and other online forums for help. Once she finally figured out how to apply, the next challenge was to avoid potential fraudsters posing as banks.

All in all, it took almost two months to get the loan, and the money was spent from the moment it was received.

“After you’re done with the rent reverse, you buy a couple of products and you’re done,” she said. “And then you need to hope and pray that you can earn enough this month to cover your rent. So it was just a lot, and still a lot. “

Search for colleagues

Business at Deseo Salon has returned to its previous level before the pandemic. However, Velarde said there are so many new clients that the salon doesn’t have enough stylists for them.

While Deseo is a business that used PPP loans to help add jobs to the economy, Velarde had trouble finding people to take those jobs. Before the pandemic, the salon had 11 employees, and last year Velarde had to replace six employees during the pandemic. Some of them decided not to return because of the unemployment benefits they received, she said. The salon now needs five more employees.

Deseo Salon & Blowdry owner Sherry Velard rinses a client’s hair on Wednesday, August 18, 2021 in Denver. Velarde founded Deseo in 2015 and is struggling to recruit new staff as the pandemic continues – although stylists and front desk workers are paid handsomely, Velarde said. “People just don’t come for interviews.” (Olivia Sun, Colorado Sun)

“It was really difficult to get people to come back. And we offer the highest salaries in the industry, we pay full coverage for their health insurance. We pay for paid vacations, we have 401 (k), we also pay a ton for marketing to keep new clients and gain new prospects, ”Velarde said.

Velarde decided to offer these benefits last year in an effort to retain employees. She hopes the pay increases and new benefits will help current and future employees know that she cares about what matters to them.

She believes that the received PPP loan fulfilled its task, and did not apply for a second one. The deadline for applications was May 31st.

End of PPP

Kulkarni said that while PPP loans have helped the economy as a whole, he believes that government aid will not be provided so quickly and in such a large volume again because it could set a dangerous precedent for the economy.

“We cannot have a sustainable policy of constantly distributing money to people. This has consequences, the money must come from somewhere, ”he said.

To prepare for the options ahead, Kulkarni encourages small businesses to look for other ways to borrow money just in case.

“If I work in a small business, I will start looking for short term loans so that they know who can help me both at the state level and in any other way, and I will start to manage this just in case the shock gets worse, I’m better be ready, ”he said.

Cox is still paying interest on the loan and is not sure if she will be forgiven. Because of this – and because of the complicated application process – she reluctantly chose not to apply for a second PPP loan.

“You have so long to get it,” Cox said. “I didn’t know what my payback status would be, and I just didn’t want to give up another one.”

Colorado Sun staff writer Tamara Chuang contributed to the story.

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