How a Machine Shop Navigates Coronavirus Limbo
(Bloomberg Businessweek) -- Business: Easthampton Machine & Tool Inc. in Easthampton, Mass.
Owner and president Chris Heon’s 5,000-square-foot machine shop makes precision tooling that manufacturers use on their production lines. He runs it with his wife, Laurie Heon, who manages the finances and the office. They had seven employees before the virus, and $573,000 in revenue in 2019.
After new orders dried up in mid-March, the Heons laid off three full-time and one part-time employee, keeping one part-timer to complete unfinished orders. "We thought we were going to be sick," Laurie says about the layoffs—the first they’d ever faced.
The decline in new orders from their manufacturing customers was dramatic: "It was just like everything stopped,” Laurie says. “It seemed like the larger manufacturers were just holding their breath, waiting to see what was going to happen.”
How they navigated PPP and EIDL
For Laurie, applying for a Paycheck Protection Program loan has been fairly smooth. On April 3, the day PPP launched, she put in an application for a $47,000 loan at People's United Bank in Springfield, Mass. Once she collected the necessary numbers, the paperwork took only about 15 minutes. She had lots of help from their company’s accountant and banker—more than dozen calls to decipher jargon and work through the process.
On April 7, the Heons learned, through their banker, that the application had been approved—but they weren’t told for how much.
"I haven't heard of anybody that it's been that fast for," Laurie says. "I guess we were one of the lucky ones."
Pre-existing relationships matter—as does speed
Laurie credits the speedy turnaround to the fact that the business had previously taken loans backed by the Small Business Administration and that her bank is a longtime SBA lender. "Our banker was just on it right away, and I was on it right away," she says.
When the rules changed the night before PPP was scheduled to launch, on April 3, Heon redid her application.
When she last spoke to her banker on April 8, she was expecting to close on the loan this week. As of April 15, she hasn’t gotten any updates. “I’m still waiting, but I have heard from other business owners that there’s a holdup for the banks to get the money so that they can disburse the loans,” she says. “But that’s just a rumor.”
Her understanding is that the clock will start ticking on the forgiveness period when the loan is originated. “Even if it doesn't get forgiven, totally, it's still a 1% loan that you have two years to pay back," she says. "There's just no downside."
She's optimistic about her company's prospects. Orders are trickling in. “People always need stuff made; that’s not going to change.” Revenue reached $573,000 last year, its highest since Chris bought the business from his former boss in 2014.
They plan to rehire their employees when business picks up. "We're going to have to judge how many we rehire, and how soon [and] how quickly we start to get our normal amount of work,” she says. “When that happens, I have a feeling we're going to be very busy. But I just don't know when that's going to happen. Nobody does.”
The experience of applying for an Economic Injury Disaster Loan was less successful. Laurie applied on the SBA’s website in late March and still hasn't heard back. At the time, she couldn’t enter an amount in the application. Her assumption was—and is—that the SBA would get in touch and explain how much of the $2 million maximum the business could borrow. "I'm a little confused about that," she says. "But that was weeks ago. It could be all different by now."
She's not annoyed, though. The SBA has been “amazing” over the years, both through its loan guarantee programs and the courses its nonprofit partner SCORE offers, she says. She ascribes the lack of communication about her application to the agency being overwhelmed. "Everybody's trying to go day by day," she says. "There's new information every single day. There are changes every single day."
Lessons from Laurie’s experience
Seek help from an accountant and a banker. Participate in webinars. Take advantage of SCORE’s counseling. And when your banker calls to ask for information, respond right away—within the hour, if possible. "I think that makes a big difference," she says. "You've got to do the work, too."
She also urges frugality as the cash crunch worsens. "For now, businesses need to save their cash as much as possible. It’s the same thing for us on the personal side.”
Finally, she wants fellow business owners—everyone, really—to take the virus seriously. “Some people are still saying it's being overblown. It's not,” she says. Some of her family members are working on the frontlines as nurse practitioners and nurses. “This is real, and people need to start acting like it's real.”
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