When the city of Spokane and the nonprofit lender Craft3 teamed up on a new small business loan program in the middle of a pandemic, they assumed the phone would ring off the hook.

Instead of a mad rush, Spokane and Craft3 have seen a steady trickle of interest in the loan program, which offers businesses struggling during the COVID-19 shutdown a loan of up to $50,000.

The Business Resilience Loan Fund Program set aside $500,000 but had cut checks totaling $223,000 to nine Spokane businesses as of Friday.

Officials targeted the loans at small businesses that were otherwise falling through the cracks of federal and state assistance programs, such as the Payroll Protection Program. But the less-than-anticipated participation demonstrates the challenges business owners face during the uncertainty of a shutdown order, even when resources are available.

Craft3 specializes in providing loans to companies that are traditionally challenged in obtaining loans. It launched operations in Spokane half a decade ago and has doled out nearly $20 million in business loans in Eastern Washington – including when it partnered with the city on a loan program for businesses on North Monroe Street while the road underwent major construction.

Given the sharp economic downtown when Gov. Jay Inslee’s stay-home order was issued, officials expected high demand that never quite materialized.

“We expected a little bit more interest at first, but I think a lot of our businesses are taking a step back and surveying the situation and trying to evaluate all aspects – there’s a lot of different and confusing messages floating around,” said Megan Hulsey, a business lender for Craft3.

Businesses are inundated with choices between grants, low-interest loans and other forms of assistance. Companies with fewer than 50 employees, like those served by Craft3, also don’t have the institutional resources to draft a complex application for a loan as quickly as a larger business.

They also have to assess the long-term viability of their operation despite not having a clear end in sight to the shutdown.

“Not all businesses are going to survive this, and some business owners are looking at it and trying to determine if it’s a good choice for them to take on any kind of debt,” Hulsey said.

Craft3 hopes businesses will take advantage of the program in anticipation of an eventual loosening of restrictions and reopening.

There are costs to restarting a business. A restaurant, for example, might have to put in a whole new order of fresh ingredients.

“There’s a cost associated with that, but (maybe) they didn’t have the cash flow to support that normal inventory purchase,” Hulsey said.

Ruly Deen, owner of Silver Element Jewelry, is a Spokane-based metalsmith and art jeweler who took advantage of the Craft3 loan.

Deen supports her business by selling her handmade pieces at art shows, but nine of the roughly one dozen she had penciled onto her calendar this year have already been canceled.

“It’s a real scramble,” Deen said. “How am I going to survive? How am I going to make a living?”

Typically, Deen would take the proceeds from one art show and use it to buy materials and make jewelry for the next.

“Without that, I needed an infusion of funds to make beautiful pieces,” Deen said. “It will give me a little bit of breathing space to make new work because you can’t sell work if you don’t have work to show.”

Deen is working to find ways to build a personal connection with clients, even when they can’t meet in person. The loan from Craft3 will help Deen improve her online presence on social media and her website, silverelementjewelry.com. She is considering ways to create a virtual showroom and engage in one-on-one live video conferencing with customers.

“Moving forward, it’s going to be all about trying to figure out how to do that virtually, which for a large portion of my client base … they tend to be older and they tend not to be into a virtual environment experience,” Deen said. “Sometimes, you don’t have a choice.”

The loans carry an interest rate of 5% – a rate achieved by the city’s investment of $100,000 of Community Development Block Grant funds into the program – and a loan fee of 2%. The term of the loan is 48 months, with payments deferred for the first three months and interest-only payments front loaded for the following three months.

The city screened applicants only to ensure that they were profitable in 2019, have been in businesses for at least two years, have a credit score of at least 640 and have a valid business license in the city of Spokane.

Following an initial screening by the city of Spokane, businesses are directed through an application with Craft3.

Applicants can call the city’s financial helpline at (509) 625-6550 to be screened.

The application with Craft3 takes about 15 minutes to complete, and suitable applicants are approved in about two days.