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Colorado’s $7.4 billion share of “forgivable” coronavirus loans includes handful of multimillion-dollar payouts

41,635 small businesses in Colorado received federal Paycheck Protection Program loans, but thousands were left out. Congress is working to add $310 billion to the fund.

The Rocky Mountain Chocolate Factory storefront on Denver's deserted 16th Street Mall on April 20, 2020. (Eric Lubbers, The Colorado Sun)
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From a nine-person bookbinder getting $48,000 to a 925-employee beverage distributor receiving $6.9 million, the Colorado companies approved for federal coronavirus stimulus loans meant for small businesses came in all sizes — and some weren’t too happy about it. 

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“They need to reconsider what small businesses are, you know, I mean 500 employees, a small business? I’m thinking not,” said Gail Lindley, the fifth-generation co-owner of Denver Bookbinding Company, which received a $48,000 Paycheck Protection Program loan that will be 100% forgiven if it’s used mostly on payroll. 

“Thank goodness for Shake Shack returning $10 million,” she said. “But wait, the CARES Act is for small businesses and when you have a $10 million payroll for eight weeks, you know there’s a problem there.”

An untold number of companies applied for a piece of the $349 billion in stimulus loans, which were limited to businesses with no more than 500 employees, though there were exceptions. In Colorado, 41,635 small businesses managed to get one during the two-week rush. In total, the Colorado loans were valued at $7.4 billion, according to the U.S. Small Business Administration, which oversees the program but relies on local banks to make the loans.

“Small businesses have had to scramble to find a 7(a) lender and many businesses have been unable to secure funding,” said Karen Moldovan, policy director at Good Business Colorado. “This ‘trickle-down’ funding is not reaching the small businesses who need it the most.” 

Big small businesses

The first news of larger companies receiving loans started Friday, a day after the loan program ran dry. Ruth’s Hospitality Group received $20 million split between two subsidiaries, including Ruth’s Chris Steak House.

Potbelly Sandwich Shop received $10 million, the maximum allowed. Hallador Energy in Terre Haute, Indiana, received $10 million, while Broadwind Energy in Cicero, Illinois, received $9.5 million. The Joint Corp., a Scottsdale, Arizona.-based chain of chiropractic offices with 14 offices in Colorado that are “temporarily closed,” received $2.73 million.

Shake Shack, with nearly 8,000 employees at 189 restaurants, including two in Colorado, also got a $10 million loan. But on Monday, the company said it would return the money after realizing the program “was underfunded and many who need it most, haven’t gotten any assistance,” the company’s founder and CEO said in a letter.

Potbelly at Republic Plaza in downtown Denver on April 20, 2020. (Eric Lubbers, The Colorado Sun)

Technically, restaurants and the hospitality industry were allowed to apply for the loans, as long as there were fewer than 500 workers at a location. Such businesses fall under a specific North American Industry Classification System code — or NAICS code 72

“I believe what the intent of Congress in passing the CARES Act was seeing that the restaurant and hospitality industry was going to be hit particularly hard,” said Sarah Mercer, an attorney and lobbyist at Brownstein Hyatt Farber Schreck who has followed the federal loan guidance closely. 

MORE: Small businesses in Colorado’s high country say the federal coronavirus stimulus has left them empty handed

There were other exceptions, too, such as a company that employs thousands but no more than 500 in the U.S.

“They really relaxed these eligibility rules to try to get as many businesses eligible as possible,” Mercer said.

That helped the case of New Age Beverage Co., the Denver distributor of drinks like Xing green tea, Búcha kombucha and the promised CBD-infused beverages. In December, New Age listed 934 full-time or part-time workers, according to its public filing. The company received a $6.7 million federal paycheck loan.

Greg Gould, New Age’s chief financial officer, said that the majority of those workers are outside of the U.S. and the company has “under 450” in the U.S. As a beverage distributor, he said the coronavirus closures impacted the business since clients include restaurants, hotels and entertainment venues that were forced to close. The company had to furlough some staff, although it kept a couple hundred working at its Utah warehouse and in Colorado to box products and drive the delivery trucks.

“We are bringing back some of them right now,” Gould said. “But we’re still trying to do what makes sense. I sure hope that things all go back to normal here. But I’m also a CFO. It’s my job to constantly be worried and make sure that we have enough cash to pay everyone’s salary and keep as many employees and families an active part of society.”



The plan is for New Age to use the money to pay employees, rent and utilities. But Gould acknowledged that at a low 1% interest rate, if the company doesn’t use at least 75% of the loan on payroll — a requirement for 100% forgiveness — it will repay the loan because there’s value in having the extra cash.

“It’s a lower interest rate than what we’re currently paying (on other bank loans) and this will help us maintain more employees here within the U.S. during this difficult time,” Gould said. “We will definitely try to get some (forgiven) but even if we don’t, the 1% was a good deal and we’re going to do what’s in the best interest of our shareholders and our employees.”

The loan was based on a company’s average monthly payroll and then multiplied by 2.5 to make sure workers are paid for at least two months. Forgiveness is based on how much of the loan is actually used for payroll. If a company, for example, retains only 50% of its regular staff in the first two months of the loan, the loan may only be 50% forgiven. The rest of the loan must be repaid at a 1% interest rate within two years.

Read more business stories from The Colorado Sun.

Colorado’s loan recipients

In Colorado, a handful of other publicly traded companies also revealed that they, too, had received the loans. DMC Global Inc. a Broomfield company with interests in energy and industrial processing, received $6.7 million in paycheck loans, according to public filings.  It employs 500 in Colorado.

Rocky Mountain Chocolate Factory,  the Durango chocolatier with 180 company-owned stores, received $1.4 million. Longmont-based agricultural-breeding S&W Seed Company, which reported a $6.6 million quarterly net loss on $12.4 million in revenue in December, received $2 million. Enservco Corp., a Denver-based oil field services company, got $1.9 million.

Two days after this story published, the SBA and U.S. Treasury updated guidance for the loans. Borrowers must certify the loan is necessary, and that includes taking into account resources such as access to other capital. The guidance became more explicit: “it is unlikely a public company with substantial market value and access to capital markets” certified its economic status “in good faith.”

With that, several public companies on Thursday began returning the loans, including Ruth’s Chris Steak House, Kura Sushi in California and DMC Global in Broomfield.

Tattered Cover on Denver’s 16th Street Mall on April 20, 2020. (Eric Lubbers, The Colorado Sun)

A handful of smaller private Colorado firms also reported receiving the paycheck loans, including Tattered Cover Book Stores and The Colorado Sun.

But if only 41,635 small businesses in Colorado received a loan, that means the vast majority did not. According to SBA numbers, the state had more than 611,000 small businesses in 2018.

“It’s really serious. I mean, there’s more small businesses than anything else in our economy,” said Mac Clouse, a finance professor at University of Denver’s Reiman School of Finance. “It’s the small businesses that are the backbone of the economy and create the employment and create the business infrastructure that we need to have for our economy.”

There are a number of reasons why companies didn’t get a loan. Many were unable to apply, especially since independent contractors and sole proprietors had to wait for a week after everyone else. Some banks did not get certified soon enough. And according to lawsuits filed against Bank of America, JPMorgan Chase, U.S. Bank and Wells Fargo, small business owners allege that the banks prioritized loan applications that “would make the bank the most money,” according to a report by Bloomberg News.

In a recent survey of members, the Colorado Restaurant Association said just 15% of restaurateurs who applied for a paycheck loan received one.

“We are actively lobbying for more funding, and we are actively lobbying for the Paycheck Protection Program to be restructured,” Sonia Riggs, the restaurant association’s CEO, said in an email. “Bigger banks seem to have worked first with customers with whom they had relationships, so smaller restaurants had a harder time accessing funding. Moreover, the program launched before rules were finalized — and we’re still waiting for clear guidelines on what businesses will need to do and document for forgiveness.”

Congress was working on a new funding program all weekend. Late Monday, the proposal to add $310 billion to the paycheck program was closer to getting into a new stimulus package that would also provide $25 billion for coronavirus testing, $75 billion for hospitals and another $60 billion for a separate small business program that also ran out of money, the Economic Injury Disaster Loan, The Washington Post reported.

Small businesses that missed out on receiving a paycheck loan should still apply through their local SBA-approved bank or lender. That puts applicants in the queue, in case new funding becomes available.

Clouse, the DU finance professor, said the small business program needs more funding. But businesses also need to reopen. And some of those can be done safely, such as a dog groomer.

“We can take our dog who now looks like a sheep instead of a normal dog, we can take her down there, we can go to the door and just hand her through the door to the groomer along with our credit card,” said Clouse, all while maintaining a safe distance. “…It would get those people back into employment, get their people working.” 

Coincidentally on Monday, Gov. Jared Polis said dog groomers can get back to shearing on April 27, as well as hair salons, tattoo parlors and personal trainers as long as they maintain stringent social distancing measures. The state’s stay-at-home order is set to end on Sunday.

This story was updated on April 24, 2020 to add new that new guidance from the SBA resulted in some public companies returning their paycheck loans, including DMC Global in Broomfield.

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