New businesses await assistance

  • At Diz’s Cafe on Elm Street in Manchester, some of the team include, from left, Billy Martin and co-owners Judi and Diz Window, and in back is Colby Collins. Courtesy of Allegra Boverman

NH Business Review
Published: 4/2/2021 7:53:05 PM

The owners of Diz’s Café signed a lease for the new eatery’s location in downtown Manchester in January of last year. It renovated “down to the studs” and made plans to open in April – “April 1, as a matter of fact, and the joke was on us,” said co-owner Judi Window.

Diz’s was able to open at the end of May, with some help from the federal and city governments but because the business was so new, it was not eligible for most assistance programs, which based their level of support on results from 2019, when Diz’s was still a dream.

As a result, Window, her husband and one work partner have had to fend mainly for themselves.

“We are still in the nitty-gritty,” working seven days a week, 10 to 12 hours a day. “I hope that we can push this through the finish line. … It would be a breath of fresh air to get any kind of funding.”

Help may be on the way. Actually, those trying to start up a business in the midst of the pandemic are on the verge of getting two helping hands, both from the state and federal governments. Although such assistance is months away, it appears that startups are now on the radar of lawmakers.

That wasn’t true the first time. Starting a new business is a daunting task, pandemic or not. But a lot of entrepreneurs are undaunted, pandemic or not.

In fact, in the year since the pandemic, there have been more than 20,000 new business filings in New Hampshire. Believe it or not, that’s up 10% compared to the year before the pandemic.

Not all of these filings actually manifest into a real business, of course. It doesn’t cost much to file some paperwork. Formulating a business plan, finding financing, leasing a facility, recruiting a staff – that is where the real time and money comes in. That’s why a new business is sometimes years in the making before even opening its doors or debuting its website.

“Any downturn has opportunities. Clients are starting businesses as a way to control their destiny. They’re concerned with swings in the economy, and they see opportunities in the marketplace,” said Liz Gray, state director of the Small Business Development Center of New Hampshire.

The businesses that launched during the pandemic ended up opening in an unprecedented economic situation. But, unlike already existing businesses, they were excluded from programs designed to help struggling small businesses.

The Paycheck Protection Program – which has so far provided nearly $3.5 billion in loans to 35,000 New Hampshire businesses – excludes businesses that started operating after Feb. 15, 2020. The employee retention tax credit, once an alternative and now a complement to the PPP, provided money only to those businesses whose revenue dropped from 2019, when these businesses weren’t around.

The state’s former business program – the Main Street Relief Fund, which distributed nearly a half billion in grants to more than 13,000 businesses – excluded firms that started after May 30, 2019.

There were roughly 21,000 business filings in the state after Feb. 15, 2020, and about 33,500 filed after May 30, 2019.

State assistance?

To address the situation, the New Hampshire Senate on March 11 passed Senate Bill 107, which would require new businesses be eligible for any state assistance program in the future.

And on the same day, Congress passed and President Joe Biden signed the $1.9 trillion American Rescue Plan. It includes language from the Recovery Startup Assistance Act co-sponsored by U.S. Sen. Maggie Hassan, D-NH, which makes new businesses eligible for the employee retention tax credit.

Employers eligible for the credit can claim a refundable credit against the employer’s share of Social Security tax equal to 70% of a full-time employee’s first $10,000 in wages including health benefits for two quarters, from Jan. 1 through June 30, 2021, if the business suffers a 20% drop in revenue during those quarters.

The American Rescue Plan allows new businesses to get the same amount – without showing any drop of revenue – though the credit for startups is limited to a total of $50,000 per quarter, or $100,000 for the eligibility period.

“New Hampshire entrepreneurs have always been key to our state’s economy, and that’s especially true now amid the COVID-19 pandemic,” said Hassan during an economic roundtable shortly before the American Rescue Plan was approved in the Senate. “New businesses can help our economy recover and provide good-paying jobs, which is why it is so important that they receive Covid-19 assistance.

It was during this roundtable when Window, owner of Diz’s, spoke. So did Adam Hammill, owner and founder of Berlin’s Exile Burrito.

Hammill opened for business nearly a year and a half ago in an attempt to fill a niche. The city didn’t have a Mexican restaurant, nor did it have many quick-service establishments apart from fast food chains.

When the pandemic happened, “We decided to move forward because takeout wasn’t as hard hit,” but “it was still rough.”

Both restaurants could use that credit now to carry them to the summer and set up their dining rooms for when the pandemic eases.

But the money won’t come until after July. That was the price Hassan had to pay to get it into a reconciliation bill. The tax credit was set to expire on July 1, so this bill reauthorizes it, adding that crucial change for startups.

At least there is a date certain. When it comes to state assistance, there isn’t even that.

The Main Street Relief Fund was an attempt to fill in the gap left by federal business assistance programs, by replenishing the decline in revenue from 2019 to 2020. It was, by far, the largest chunk of the $1.25 billion of federal CARES Act funds the state received last spring.

But you can’t compare revenue from the two years when you weren’t around in one of them, and the state set a hard date that businesses could not get around, even with an appeals process.

While that Main Street money is gone, SB 107 would allow new businesses – those established after May 26, 2019 – to be part of any future business assistance program.

The program was designed for small businesses, said Sen. Rebecca Perkins Kwoka, D-Portsmouth, the bill’s sponsor, when introducing the bill at a Commerce Committee hearing. “The unintended consequence was that many of the small local Main Street businesses lost out” because of that “arbitrary date.”

Sen. William Gannon, R-Sandown, did raise a concern, saying that a lot of businesses can’t make it even in the best of times. “How would I know I’m giving to a business that is not going to be successful?” he asked.

That isn’t the situation for Putting on the Glitz, a popular women’s accessory boutique in Portsmouth that has been successful for 16 years. It is only “new” because it changed hands September 2019.

Former employee Lizabeth Tompkins bought the business after taking a year of courses on how to run one. “It was always a dream of mine,” she said.

She had five years of solid revenue to present to a local bank to secure a loan in February 2019, but a bank merger put that on hold. And for the last quarter of 2019 and most of the first quarter of 2020. “I exceeded my projections by bringing in new product and new customers.”

She was able to get an Economic Injury Disaster Loan from the U.S. Small Business Administration to make it through three months of the shutdown. Business picked up during the summer, but as the weather cooled so did foot traffic and revenue.

“Am I in jeopardy without assistance?” Tomkins said during a hearing on SB 107. “Yeah, I’m scared. I could lose everything. I don’t have another source of income. You try to stay hopeful, but the risk is high.”

She noted that those that received grants in the previous Main Street program and ended up doing better last year than in 2019 would have to pay some of the grant back. “Is there any way some of that could be funneled to us? If we aren’t Main Street, who is?”

Similar stories

Kimberly Clark started two new restaurants in downtown Durham, but one was at a location that had been a restaurant for more than a decade. It was actually supposed to open last March, but Clark held off until the summer. She was able to keep going through the summer, employing as many as 32 people. But the winter was especially difficult, and the “Main Street Fund would have allowed us the breathing room we needed.”

Other restaurant owners told similar stories at the hearing.

Strip Nine Brewery, which sold craft beer and artisan pizza in Somersworth, was open about six months before it was forced to close, so it was able to get $55,000 in PPP funding. That carried it though the summer, but the restaurant saw a “tremendous falloff” in November, said Patrick Kelly, who owns the business with his two brothers. “I think we should be entitled to some sort of relief.”

The Stalk Restaurant had lines outside the door when it opened in Dover mid-January 2020, said John Daniels, one of its owners.

“We were packed,” he said. “The servers were shimmying the foods over people’s heads to get by. Our whole thing was being cozy, which is not what anyone wanted during the pandemic.”

Revenue dropped by 60% to 70%, he said. After an initial PPP loan of $35,900, the restaurant was unable to show any drop in revenue required for a second PPP loan or a Main Street loan, since it had no track record in 2019.

“We made the decision not to pay ourselves,” said Daniels.

The owners wound up getting a $15,000 stipend for the whole year, for 80-hour weeks. “That’s just not sustainable.”

Such stories won over the skeptical Gannon, and the rest of the Senate Commerce Committee, which recommended passage on a 5-0 vote. The bill also unanimously passed the Republican-dominated Senate along with other non-controversial bills on the consent calendar.

But it still must go through the House, meaning passage is still months away. It’s not clear where Gov. Chris Sununu, who devised the Main Street program in the first place, stands on the measure.

Even if the bill does become law, there is no guarantee there will be another state-run business assistance program in the future. As for funding, the state Department of Revenue Administration won’t know how many successful businesses wound up not needing Main Street Assistance before taxes are due on April 15, and the state hasn’t yet decided what to do with it anyway.

There might be money left over from other programs administered by the Governor’s Office for Emergency Relief and Recovery. On Jan. 22, the agency reported that it had not spent more than $100 million out of the $1.25 billion from the CARES Act, but that was the last update. GOFERR did not respond to a request for a more recent estimate from NH Business Review by deadline.

One fund that can supply support to new businesses is the $30 million New Hampshire General Assistance & Preservation Fund, administered by the Business Finance Authority, which still has nearly $10 million.

The state of New Hampshire, however, is expected to get over $1 billion from the American Rescue Plan, though it is unclear at deadline what the parameters for spending the money are. When asked whether GOFERR was considering launching another program to help businesses, particularly new businesses, GOFERR spokesman Alex Fries replied with this statement:

“Past small business programs were designed to provide relief to the greatest number of businesses quickly and efficiently. GOFERR achieved such by utilizing a revenue replacement formula that uses actual 2019 gross receipts as a verifiable baseline, against which actual and/or estimated 2020 gross receipts could be compared.”

When NH Business Review repeated the question about any future programs, Fries did not reply by deadline.

 

These articles are being shared by partners in The Granite State News Collaborative. For more information, visit collaborativenh.org. 




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