Your tax dollars helped AZ small businesses recover from the pandemic - was it enough?

TUCSON, Ariz. (KOLD News 13) -It’s been almost three years since the Cares Act set up Covid relief for companies, with the paycheck protection program and disaster loans. Many of those are coming due right now, for businesses still struggling. The PPP ended in 2021, but we wanted to know how much your tax dollars impacted Arizona’s recovery.

According to FederalPay.org, 169,248 Arizona businesses received Paycheck Protection Program loans totaling $12.4 billion. The average loan was for about $73,000 dollars - with restaurants borrowing the most. Beauty salons, real estate agents, and doctors offices were other top recipients, and the average company size was nine employees.

How successful were the loans at protecting paychecks? The Small Business Administration reports PPPs reduced job losses by about 13%, saving around eight million jobs - and that 91% of PPP loans now have been at least partially forgiven - mostly turned into government grants.

But it wasn’t a perfect system: tens of thousands of loans were deemed potentially fraudulent. Last month, a house subcommittee blasted Scottsdale’s BlueAcorn and a handful of other companies for “facilitating fraudulent loans” and called for a Justice Department investigation. The report states Blueacorn’s owners pocketed nearly $300 million in taxpayer-funded fees, and may have fraudulently received PPP loans themselves - noting a co-owner “claimed to be an African American and a veteran, both of which appear to be false.”

In response, the SBA banned Blueacorn and says, “The SBA will continue to prioritize its response to findings of potential fraud in pandemic relief programs.”

These so-called Financial Technology or “Fintech” companies sprouted up to process Covid loans, something nonprofit LocalfirstAZ did free for Arizona small businesses, which lagged behind other states in receiving funds.

“They put out the emergency loans through banks. You had to be an SBA lender to give those funds out - and what we recognized was many of our businesses have zero to 10 employees. They also don’t have the biggest bank accounts sitting in these big five banks,” said Jessica Barfield, Director of Tucson Business Development for Local First Arizona.

Kristi Barnett had just opened her Hotworx studio in Marana when the pandemic hit. Because it was so new, It didn’t qualify for the Emergency Income Disaster Loan, but her more established Planet Beach spa and studio in Oro Valley did, so she applied. She didn’t end up using the money. After a banner year, she’s already paid it back.

“I figured it was better to have it and not need it - then to need it and not have it,” said Barnett. She did get two months rent from the state, and one of the more recent federal offerings: an employee retention grant. ”It was basically ten thousand dollars to give to my employees for sticking with me through Covid and that was very impactful for me. Let’s just say, there were a lot of tears.”

Hotworx came back strong. Barnett is grateful for the government help, but wishes the Cares Act had focused more on microbusinesses, like hers.

“Did it help, yes. Is it the reason we survived, no,” said Barnett. She credits a supportive customer base, but knows other Southern Arizona businesses weren’t so fortunate, “If you think back to some of the beloved businesses in Tucson that went under think some of that money could have helped them make it through covid. We just got lucky.”

Barfield says one in six businesses in Arizona had to close permanently because of the pandemic.

When you think about one in six businesses having that negative effect, the five that survived need us now more than ever,” Barfield said. “The businesses in our community are still struggling, and I think this is something they’re going to continue to struggle with for years to come.”

She adds, Arizona businesses were slow to receive grants and loans because of our lack of community banks.

”There was a huge misappropriation happening with some of the larger banks on who was getting the funding,” Barfield said.

Brookings institute figures back that up, showing Tucson small businesses were 20 percent less likely to have received loans than, say, those in bigger metros like Atlanta or Dallas.

“We realized that Arizona was not getting their share of local resources and so we got busy,” Barfield said.

Local First Arizona helped process loans and brought in $50 million that went directly to Arizona business owners.

But what’s the next step? The newly-created Arizona Economic Recovery Center is writing grant applications to revitalize a post-pandemic Southern Arizona, like the Sunshine Mile Project, aiming to bring people back to businesses blocked by Broadway construction. But if they build it, they need you to come to shore up a post pandemic Southern Arizona economy.

Barfield pointed to research showing, if you spend $100 at a big box store, $13 goes back into the community. But f you spend that money at a local-owned business, the amount that stays in Southern Arizona jumps to $43.

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