More than $1.2 billion in Oregon Paycheck Protection Program loans yet to be forgiven

The Toffee Club was locked up and dark when owner Niki Diamond applied for a second loan through the Paycheck Protection Program in February 2021.

With capacity restrictions still in place, Diamond said it didn’t make sense for her to reopen the English football pub, which relies on sales from large game day crowds. But her rent, utility and insurance bills were still coming due, and she needed the loan to keep the Southeast Hawthorne Boulevard bar afloat.

She used the $105,000 she received to hire back two cooks for takeout orders and pay her outstanding bills. The federal coronavirus relief program, however, required that businesses spend 60% of their loans on payroll to be eligible for full forgiveness.

Diamond expects her loan will be partially forgiven because she spent a portion on payroll, but in a few months she will likely be required to start paying back the rest – at a time when her business is still recovering from the pandemic.

“It’s just an extra financial burden during an already very challenging time,” Diamond said. “We’re super optimistic about the spring and the summer and we’re excited for our business to start to come back, but the last few months have been really rough. We closed twice over Christmas. So, any buffer that was there isn’t there anymore.”

Oregon businesses and nonprofits received nearly 116,000 loans totaling more than $10 billion through the Paycheck Protection Program in 2020 and 2021. More than 87% of that loan money has been forgiven, according to an analysis of program data by the Oregonian/OregonLive.

But about an eighth of the money, or more than $1.2 billion, that Oregon businesses received through the program has yet to be forgiven, according to the Small Business Administration data last updated in January. Nationwide, about $84 billion has yet to be forgiven, according to the agency.

Many Oregon business owners who received loans last year are still making their way through the forgiveness process and will ultimately see their loans converted to grants. Some business owners have been left in limbo due to glitches and delays in the process of applying for forgiveness. Others who used the money to stay afloat but failed to meet the requirements for forgiveness are now on the hook for thousands – with bills already coming due.

As the program winds down, policy experts have begun to debate how much it helped ease the pandemic recession. A Massachusetts Institute of Technology study found that only between a fourth and a third of the $800 billion allocated to the program went to workers who would have lost jobs.

The program did provide a key lifeline to businesses. Even without forgiveness, businesses who took the loans got a good deal, with a low 1% interest rate and access to funding at a time when many businesses were in crisis. And most still credit the loans with keeping their business alive, even as they now grapple with repayment.

Lisa Schroeder, the owner of Mother’s Bistro & Bar in downtown Portland, applied for a loan through the Paycheck Protection Program in May 2020, even though her restaurant was closed at the time and she knew she would not spend 60% of the funding on payroll. She had already tried to-go meal service to keep staff working, but said that lost about $20,000 a month.

Without an infusion of money, Schroeder said, there was no way she would have been able to keep up with bills and the rent she owed on two properties – she had taken a risk the year before by moving her restaurant to a larger location in downtown.

She hoped that the Small Business Administration would ultimately ease the requirements for loan forgiveness, but figured a low-interest loan would be better than nothing at a time when her business was simply fighting for survival. She ultimately received two loans through the program totaling $1.4 million.

“I was willing to roll the dice,” Schroeder said. “Either way, I was going to be in debt. I was just hoping for the best.”

Last summer, everything changed for Schroeder when Mother’s received $4.9 million from the Restaurant Revitalization Fund, another federal pandemic aid program. She used some of the money to start repaying her Paycheck Protection Program loan when the first payments came due last year, and the cash gave her the leeway to give her staff raises – even though foot traffic downtown hasn’t recovered and the restaurant is still only open four days a week.

More than 2,300 Oregon restaurants received funding through the Restaurant Revitalization Fund, but thousands of others weren’t as lucky because the program quickly ran out of funds.

“The only reason I’m able to breathe is because of the Restaurant Revitalization Fund,” Schroeder said. “It was a godsend.”

As some Oregon businesses begin to repay their Paycheck Protection Program loans, others are still waiting to find out whether theirs will be forgiven.

Carl Balog, the medical director at Portland Pain and Spine in Tigard, received two loans through the Paycheck Protection Program totaling more than $173,000. The money was a lifesaver, he said. The clinic’s revenue dropped by 50% during the first six months of the pandemic after Gov. Kate Brown ordered health care providers to cease all non-emergency procedures. The loan enabled Balog to continue to pay his staff and keep the clinic open to patients in need of immediate medical attention.

He said he applied for forgiveness for his first loan last summer, but his application is still being processed. He said he has called and emailed Kabbage, the online lender that gave him the loan, multiple times looking for an update but hasn’t heard back.

An analysis of 2020 Paycheck Protection Program loans by the Miami Herald recently found that Kabbage had the worst rate of forgiveness of any major lender in the program.

Balog anticipates that his loan will ultimately be forgiven because he followed the requirements set by the Small Business Administration. In the meantime, though, he has been left in a state of uncertainty.

While business has picked up since the early days of the pandemic, Balog said the clinic is still recovering from two years of slashed revenue. Progress the practice made in the interim was set back by having to delay procedures when the delta and omicron variants of COVID-19 caused cases to spike.

Having to repay the federal loans would be another major setback for the business financially.

“I needed those loans as badly as I now need them to be forgiven,” Balog said.