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News February 01, 2021

Demand for PPP2 Loans Strong in Promo

With COVID-19 still causing major business challenges, promotional products firms are applying in droves for more support from the new round of Paycheck Protection Program loans.

By  Christopher Ruvo

What did the Paycheck Protection Program loan (PPP) do for Jane Halverson’s distributorship in 2020?

The president of Bismarck, ND-based Dakota Promotions & Printing (asi/174238) doesn’t mince words.

“It kept our doors open and our employees paid,” she said.

And that’s why, with the COVID-19 pandemic still causing massive challenges for her business, Halverson applied for another PPP loan the day the new funding became available in mid-January.

Jane Halverson

Jane Halverson, Dakota Promotions & Printing

“I’m still waiting to hear back from my banker as to whether I get it or not, but receiving the forgivable PPP loan is essential to keeping my store open,” said Halverson, who employs four people.

Halverson’s story is emblematic of many companies in the promotional products industry. When industry sales plummeted nearly 45% year over year in the second quarter of 2020, promo distributors, suppliers and decorators flocked by the thousands to secure funding through the PPP, a federal program that allows businesses to receive low-interest loans – completely forgivable if certain parameters are met – to pay for payroll and other costs.

Continued COVID Challenges Propel PPP Need
The federal government approved a new $284 billion round of PPP at the end of December. You can learn about eligibility and forgiveness guidelines here. With PPP again in play, promo companies are applying in droves for the relief.

“If we don’t receive a second PPP loan and the economy stays the way it is, it will be a tough struggle to make it through the year,” said Richard Bernardo, owner of Groton, CT-based distributor R&B Apparel Plus (asi/303251).

The renewed rush for assistance is a result of continued pandemic challenges, like ongoing societal restrictions that are hurting end-customers’ businesses, no live events for which to provide branded merchandise, and general marketplace uncertainty that has clients reluctant to open their marketing purses. Those factors, some promo firms say, are exacerbated by the fact that the first quarter is often a slower time for promo sales and that there’s been a decline in revenue from personal protective equipment (PPE) business.

Spencerport, NY-based Lamont Awards & Apparel (asi/248398) has been in business for 48 years. President Michael Montecalvo is concerned that the firm won’t make it to 49. Lamont has traditionally focused on producing uniforms, promo products, incentives and more at the start of each sport season, and then providing trophies and awards at the end of each season. The pandemic has decimated that business. Lamont has adapted, selling gaiters and face masks, but even with that, the business is operating at reduced hours and sales are way down.

Fortunately, Montecalvo said, a first-round PPP loan, along with other government assistance, has helped keep the business and its people afloat. “Without the government’s help, I believe that our business would be closed, or at the least all of my employees would be laid off,” he said.

Montecalvo has applied for another PPP loan, saying that if he doesn’t receive the funding, he’ll have to reduce staff hours even more. “We’ll use it for payroll, but the bigger problem is we still have to pay expenses on our 10,000-square-foot facility – heat, lights, rent, taxes and other expenses,” he explained. Long term, the “only hope for our business to return to a normal operation is for our sports market to return.”

Critics and Proponents of PPP
Some academic economists who have studied the PPP have said it’s saved relatively few jobs and been less efficient than other government-backed initiatives aimed at propping up the economy during COVID-19, The New York Times reported. “A very large chunk of the benefit went to a very small share of the firms, and those were probably the firms least in need,” David Autor, an M.I.T. economist, told The New York Times.

Nonetheless, businesses, Main Street banks and policy experts from Wall Street to Washington, D.C., say the PPP has been instrumental in saving businesses, thereby preventing a more severe recession, while helping to maintain an economic foundation from which a recovery can be built with greater speed.

“A major goal was to keep these businesses alive so that when the economy started to recover and then the economy reopened, there would be businesses around to hire unemployed workers,” Michael R. Strain, an economist at the American Enterprise Institute, a conservative think tank, told The New York Times. Strain said preliminary evidence suggests that the program has succeeded by that metric.

As with Lamont Awards & Apparel and Dakota Promotions & Printing, other promo companies’ experiences offer anecdotal testimony in support of Strain’s position.

Myrtle Beach, SC-based supplier Standard Plastic Card Solutions (asi/88999) received PPP funding last year – money that was integral to keeping the business viable and its three employees in work.

“Our revenue fell about 20% last year,” said John Rusher, partner. “It was especially bad in the early stages when hotels and restaurants totally shut down, as they are our bread and butter. The PPP was a big boost to help us recover our losses and keep things going. It also made us grateful because we were able to not only stay open, but also help others in our community through donations to the local food bank.”

In early 2021, Standard Plastic Card Solutions is applying for another injection of PPP money. It’s expected to help keep the company pushing forward as sales, while up from the worst of last year’s lows, remain depressed below pre-pandemic levels. “We’re hoping that business will return to something like ‘normal’ by maybe the third quarter,” Rusher said.

Some promo firms, like Fort Lauderdale, FL-based distributor Veterans4You (asi/351897), have used PPP loans to help propel important business pivots. Owner Lulu Farrell explained that the firm’s first PPP loan, and now its second, which has already been received, have been put toward “supporting our rapid expansion into new areas of growth, which required different skill sets, products and services.”

Farrell believes that the PPP should be tied to the long-term strategic plan a company has adopted for the post-COVID period. So far, the approach has worked for Veterans4You. Said Farrell: “Our sales were significantly higher in 2020 than 2019.”

The first round of PPP launched on April 3, 2020, as part of the Coronavirus Aid, Relief and Economic Security Act (CARES Act). The forgivable loan program was meant to help small businesses keep workers on the payroll and take care of certain other business expenses. The program got off to a rocky start, but quickly gained momentum. By April 16, the initial $349 billion in PPP funding was gone, scooped up by businesses negatively impacted by shutdown orders related to the coronavirus pandemic. Congress approved a second $310 billion round of funding on April 27. The latest round of PPP comes as part of a $900 billion coronavirus economic relief package that Congress and the Trump administration approved at the end of December 2020.