How a Seattle Ice Cream Maker Navigates Coronavirus Limbo

The Business

(Bloomberg Businessweek) -- Molly Moon’s Homemade Ice Cream, a Seattle institution with eight locations, was founded by Molly Moon Neitzel in 2008. It had about 100 employees and around $8 million in annual revenue before the virus.

Pre-Government Relief (Late February)

Neitzel, the CEO, anticipated the severity of the crisis in late February after sales suddenly dropped significantly below projections. She wrote letters to state and local officials in early March, warning them that small businesses would be hit “really hard and really fast.” As the situation worsened, she asked her executive team to take pay cuts, stopped paying herself, and, in phases, laid off 95 people—nearly her entire staff—to prevent the spread of the virus.

The day of the most layoffs was “the worst day of my career,” Neitzel says. “Some of my employees have kids and mortgages.”

Her rent, for all locations, is $43,000 a month. She’s committed to continue to pay health insurance premiums for all her workers: a total of $31,000 a month. “I’m supposed to pay that how, with no business?” she asks.

Neitzel and her finance and human resources director, Denise Brown, researched the two main federal emergency loan programs for small businesses: the Paycheck Protection Program (PPP) and the Covid-19 Economic Injury Disaster Loan (EIDL) program.  (Both PPP and Covid-19 EIDL are no longer accepting applications because their funding has been temporarily depleted; the Senate passed legislation for more money on April 21.) Right now, Neitzel, Brown, and five others are still working.

Pursuing EIDL (Mid-March)

After Neitzel and Brown completed their EIDL application for the maximum $2 million amount on March 18, it was thrown out because a new “streamlined” application had been introduced, Brown says. “We lost our place in the queue.” The new application lacked a way to include the loan amount they wanted, she adds. 

When Brown finally got through to the Small Business Administration on April 8 to seek guidance, she was placed on hold as caller No. 1,563. When an agency representative answered the phone, Brown says, it was clear “nobody there actually has much information.”

The rep read off a script, explaining that, “due to current appropriations for this program, the SBA will make an initial loan disbursement for two months of working capital, up to a maximum of $15,000 per applicant. This is in addition to the advance of up to $10,000 for each small business.”

More EIDL Confusion (Mid-April)

Frustration and more ensued. Then, on April 15, the SBA unexpectedly offered an EIDL loan for $500,000 at 3.75% interest, payable over 30 years. Neitzel and Brown accepted, got confirmation it was being processed, and started making plans to rehire and reopen.

Preparations included a call to an investor to strategize about managing their debt. Their plan was to use the $500,000 EIDL as a safety net, run the business as lean as possible in the short term, then rehire all employees and reopen this summer.

The EIDL Saga Continues (Ongoing)

On the morning of April 17, when Neitzel and Brown logged in to the SBA’s system, they received a message informing them that the loan had been denied. “More communication will come via email,” it read. “The loan amount available is $0.”

When Brown didn’t get an email, she called the SBA. A rep told her the loan had been denied because it didn’t meet “new criteria.” The rep, however, didn’t know what the new criteria were. No email had arrived as of April 21.

“You just get to a place where you’re going to be OK with the painful decisions you had to make over the last 48 hours, and then the floor dropped out from under me again,” Neitzel says. “And now I have to make a bunch more painful decisions. Or should I wait to see if they’re going to change their minds again or their criteria? It’s the craziest amount of limbo I’ve ever experienced.”

Neitzel has been reaching out to elected officials. They “need to understand that businesses are making plans to bring the economy back in a safe way,” she says, “and then getting the rug pulled out from under them.”

Pursuing PPP (Early April)

The application for PPP was somewhat smoother. The business applied to the program on April 3. Three days later, Neitzel received a late-night text from her banker at Washington Trust saying she’d been approved for $734,000. The bank, which is more than a century old, has been “amazing” in how it’s handled the lack of guidance from the government about PPP, she says.

PPP Disbursed (April 20)

The loan was disbursed on April 20. In order for it to be forgiven, Neitzel needs to follow rules meant to encourage businesses to quickly rehire their workers. The clock is already ticking for forgiveness eligibility. 

But rehiring everyone now and using up the money to pay them while there’s no work makes no sense, Neitzel says. Her employees are getting unemployment benefits. “The best thing for public health right now is for us to stay closed,” she says. “PPP is a really, really short-term fix. It is a very incomplete solution.”

She estimates the business will use about $275,000 of the PPP loan on payroll to reopen at some point in June—as long as it’s safe. She’s been paying a few chefs and a delivery driver to get ice cream to grocery stores.

The unforgiven part of the loan must be repaid over two years. Payments of $41,000 a month are due starting in mid-November, Neitzel says. “The unforgivable portion of the PPP is the dumbest thing ever and would be really unwise for people to take,” she says. That’s why she’s pretty sure she’ll spend only what’s forgivable and return the rest.

Lessons

What might small-business owners learn from Neitzel’s experience? “I don’t know that any business owner needs advice from any other business owner right now,” Neitzel says. “We all have incredibly unique situations. We all have businesses that may or may not be able to open in an appropriate amount of time to utilize the payroll [part of PPP]. And we all have employees who are paid differently compared to unemployment [benefits], and that’s different state by state.”

Her main message about PPP: “It is a tool in what needs to be a diverse portfolio of tools to save or bail out Main Street businesses. And it’s not, probably, the primary tool. It’s not going to work for a lot of people.”

Neitzel urges policymakers to help Main Street tackle the next phase of the pandemic. “Nothing about Covid-3 [legislation] should be undone, but there has to be a Covid-4 stimulus bill that has a more diverse set of tools, that has more subsidies or bailouts for small businesses, not just the big businesses, and takes a long-term look at the potential economic devastation of our country,” she says. “Covid-3 was an emergency response to a short-term emergency. Now the strategic, long-term solutions need to get worked out.”

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