Utah Leads Together Small Business Bridge Loan Interim Impact Report

INTERIM IMPACT REPORT

The Utah Leads Together Small Business Bridge Loan Program 1

Dear Reader, Like any global pandemic, COVID-19, once it reached the U.S., spread quickly in Utah.

Within a matter of weeks, most operations and activities in the state were impacted by the contagious coronavirus.

The Utah Governor’s Office of Economic Development (GOED) used state funding to launch the Utah Leads Together Small Business Bridge Loan Program during the last week of March 2020.

The program issued $12 million in bridge loan funds to Utah small businesses in two different rounds. State funds earmarked for the loan program were later replaced with federal dollars following the federal government’s response to the economic impacts of the growing pandemic. In round two of funding, nonprofits were also eligible to receive bridge loan funds.

The Bridge Loan program, administered by GOED, was one of the first in the country to provide gap funding to small businesses. I’m proud of the GOED team, who mobilized quickly and effectively, working days, evenings and weekends, setting up online applications, providing communications, reviewing applications, establishing contracts, and awarding bridge loan funds within weeks.

We know from bridge loan recipients that this fast action provided a lifeline to Utah small businesses, many of whom couldn’t have stayed in business without it. This initial report includes vital findings and data about the Utah Leads Together Small Business Bridge Loan Program. It provides an overview of what types of industries received loans and where these loans were distributed around the state. We plan to release a more comprehensive report in the coming months. I hope you will find this report useful. We look forward to continuing to serve the needs of businesses in the great state of Utah.

Sincerely,

Val Hale Executive Director Utah Governor’s Office of Economic Development

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Executive Summary The Utah Leads Together Small Business Bridge Loan Program was deployed to provide gap funding to Utah’s small businesses and nonprofit organizations during the COVID-19 shut down. It was administered by the Utah Governor’s Office of Economic Development (GOED) in two rounds. A total of $12 million was awarded to 1,150 Utah based small businesses and nonprofit organizations, which included $11 million in state funds and $1 million provided by the WCF Insurance Foundation.1 The Sorenson Impact Center, a think tank based at the University of Utah’s David Eccles School of Business, is conducting a study on the short term impacts of the program. This preliminary report analyzed how and where the loans were deployed in the state of Utah. The full impact report will be published late Summer 2020.

The key findings of this report are summarized below •

he program was purposely developed to act as a bridge between local (city and county) and T federal interventions.

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1,150 loans were deployed across the state of Utah, including all but one county (Millard).

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The average loan was $10,000.

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27% of loans were deployed to small businesses in rural counties.

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The program reached the hardest hit industries in the state, including food and beverage, retail, healthcare, and hospitality and leisure.

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Over half of loan recipients had 10 or fewer employees (52%), and 31% had 5 or fewer employees.

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Grand County received 9% of loans given to rural counties, 56% of which were in the hospitality and leisure or retail industries.

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oans given to businesses in rural counties were in food and beverage, leisure and hospitality, and L retail.

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oans given to businesses in urban counties were more varied across industries, including L healthcare, business services, consumer services, construction and trade services, as well as a large number of loans in the food and beverage industry.

1 Utah Governor’s Office for Economic Development (2020, April 23) Utah Leads Together Small Business Bridge Loan. Retrieved from https://business.utah.gov/utah-leads-together-small-business-bridge-loan-program/

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Background The COVID-19 pandemic has put a tremendous strain on Utah’s business and nonprofit communities. While the state enjoys a diverse economy, steeped in entrepreneurship, the impact of the COVID-19 pandemic has been swift and far reaching.

Applications were scored by independent evaluators based on solvency, severity of loss, multiplier or supply chain roles, and impact on unemployment. The highest scoring applications were awarded the maximum allowable amount, with award amounts decreasing as scores decreased.

On March 17, 2020, the state of Utah limited gatherings to no more than 10 people, closed dine-in services for bars and restaurants, and required personal care businesses such as hair salons, nail salons and massage parlors to close. In the following week Governor Herbert sent out additional guidelines and restrictions, including the “Stay Home, Stay Safe” directive2. These efforts were part of a nationwide public health response to the COVID-19 pandemic.

This loan program was the first of its kind in the intermountain region (Utah, Colorado, Idaho, Wyoming, and Montana) with an explicit commitment to supporting rural communities. Specifically, a minimum of 25% of the program’s total funds ($4 million) was to be targeted at rural Utah businesses and nonprofits.

The first round of the Utah Leads Together Bridge Loan Program was opened and closed by March 31st, 2020, just two weeks after the first public health restrictions in the state were implemented. The second round was completed on April 13th. The program reached 1,150 small businesses across the state of Utah, deploying almost all available funds ($12m) in just four weeks. While similar programs have been developed and deployed across the country, the efficiency and expediency of the program is exceptional. The impact of the program on Utah’s small businesses is currently being measured with the help of the Sorenson Impact Center at the University of Utah.

Based on engagement with counties, chambers of commerce, state agencies, and a range of other stakeholders, GOED identified the need for a financial loan program targeted at small businesses and 501(c)3 nonprofit organizations. Its primary objective was to rapidly address the short-term economic impact of COVID-19 in a transparent and accountable manner. Utah state agencies quickly mobilized to identify $11 million for immediate deployment. These monies were supplemented with an additional $1 million, provided by the WCF Insurance Foundation.

March 20, 2020

The Utah Leads Together Small Business Bridge Loan Program offered businesses and nonprofits3 with 50 or fewer employees “working capital to support payroll expenses, rent, mortgage payments, utility expenses, or other similar expenses that occur in the ordinary course of operations.”4 The program provided successful applicants with loans between $5,000 and $20,000 at 0% interest for up to five years. Core requirements included the ability to demonstrate financial hardship or disrupted operations.

First Public Health Restrictions

March 31, 2020 First Round of Bridge Loans

April 13, 2020 Second Round

2

State of Utah (2020, March 27) Full Text: Governor’s “Stay Home, Stay Safe” Directive.

Retrieved from https://coronavirus.utah.gov/full-text-governors-stay-home-stay-safe-directive/

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In the first round of funding, businesses were the sole beneficiaries of funding. In round two of funding, following feedback, this was expanded to nonprofits with 501(c)3 status.

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Utah Governor’s Office for Economic Development (2020, April 23) Utah Leads Together Small Business Bridge Loan.

Retrieved from https://business.utah.gov/utah-leads-together-small-business-bridge-loan-program/

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Overview

$5,000-$7,000

In total, 2,046 small businesses and nonprofits applied for the program and 56% (1,150) obtained a loan. Almost every small business or nonprofit that qualified for the program was able to receive a loan.

Loans between the amounts of $5,000 and $20,000 were issued to small businesses and nonprofits that were impacted by COVID-19, with the majority of loans (31%) in the amount of $10,000.

$7,500-$12,000

28%

42% 30%

$13,000-$20,000

Figure 1: Percentage of Loans Awarded

by Loan Amount

Overview by Number of Employees The program was designed for small businesses, defined as businesses with fewer than 50 employees. Over half of loan recipients had 10 or fewer employees (52%), and 31% had five or fewer employees.

Figure 2: Percentage of Loans Awarded

by Number of Employees

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Overview by Industry The majority of small businesses and nonprofit recipients fall within five different industries (60%) These include healthcare, food and beverage, human services, business services, and retail.

The healthcare industry accounts for 19% of loan recipients (~$1.9 million), many of whom are dentists or mental healthcare professionals.

Many of those in the food and beverage industry are restaurants and account for 13% of loan recipients (~$1.75 million). Small businesses and nonprofits in human services (i.e. hair salons and fitness studios) received 9% of loans (~$970,000).

Business services is a highly varied category of companies that serve other businesses, such

Figure 3: Percentage of Unemployment Claims

by Industry

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as management and consulting, or law firms; businesses in this category received about 9% of loans (~$960,000). retail is the final industry in the top 5, and accounts for 11% of recipients (~$1.34 million). Utah’s fourth largest industry pre-COVID-19, education and health services, received many of the program’s loans in both urban and rural counties. Utah’s fifth largest industry, leisure & hospitality, received many of the program’s loans in rural counties.

Figure 4: Percentage of Loans Awarded

by Industry

The industries supported through the program represent the hardest hit industries, measured by the percent of unemployment claims by industry from March 16 to May 9, 20205. Food and beverage and retail are the second and third largest industries to receive support from the program, and had the first and second largest industries by unemployment claims. The program’s first largest recipient industry, health care, had the fourth largest unemployment claims as an industry in the state6.

“Thanks for all your hard work and all that you and your team are doing! I have been impressed with how rapid and communicative you have been. I’m proud to be a Utahn, and thanks again! “ - Janice Boes

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Utah Department of Workforce Services (2020, June, 2) Unemployment Insurance Claims Data Shed Light on the Local Economic Impacts of COVID-19 Public Health Directives. Retrieved from: http://utaheconomywfsouth.blogspot.com/2020/06/unemployment-insurance-claims-data-shed.html

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The second largest industry by unemployment claims is unknown, meaning the industry wasn’t reported for those claiming unemployment in this category.

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Rural and Urban Counties The program was designed to provide immediate financial assistance to small businesses and nonprofits across the state, with a goal to provide 25% of the loans to rural businesses and nonprofit organizations.

Rural areas in America have had a slower economic recovery since the Financial Recession in 2008/2009.7 The program specifically targeted rural communities, which make up 10% of the state’s population8, in order to account for the disproportionate economic impact of the pandemic on these communities.

The rural loan goal was surpassed with 27% of loans awarded to small businesses and nonprofits in rural counties. Even when factoring in microbusinesses (under 10 employees), over 25% of loans went to rural counties. Out of 605 loans given to microbusinesses, 165 (27%) were for rural microbusinesses and 440 (73%) went to urban microbusinesses. In fact, loans were given to small businesses and nonprofits in every Utah county except Millard County9.

Figure 5: Number of Loan Recipients

by County

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United States Department of Agriculture Economic Research Service, 2014.

8

United States Department of Agriculture Economic Research Service, 2019.

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Only one application for support was received from Millard County.

https://www.ers.usda.gov/amber-waves/2014/october/ rural-employment-in-recession-and-recovery/ https://data.ers.usda.gov/reports.aspx?StateFIPS=49&StateName=Utah&ID=17854&AspxAutoDetectCookieSupport=1

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Urban Counties Small business and nonprofits in the four urban counties in Utah (Weber, Davis, Salt Lake, and Utah) represented 76% of the applicants and 72% of the recipients for the program. Among the loans given to small businesses and nonprofits in urban counties, the majority (61%) were issued to Salt Lake County locations, followed by Utah County at 24%, Davis County at 10% and Weber County at 5%.

Figure 6: Percentage of Loans Awarded

by Urban County

"I know you and your team are working tirelessly for us business owners right now, and it is SO APPRECIATED! Thanks for putting together this program, and I am so grateful to be an award recipient."

- Angela H. Brown

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Rural Counties Small businesses and nonprofits in the 25 rural counties in Utah accounted for 25% of all applicants and 27% of the recipients of the program. Overall, 63% of those who applied in a rural location were given a loan. The distribution of loans within the rural cohort largely reflects population patterns among these counties. An exception to this is Grand County, which received 9% of loans given to rural counties. Grand County has a large tourism industry which has been greatly impacted by closures. Of the total number of Grand County loan recipients, 56% were in the hospitality and leisure or retail industries.

Figure 7: Percentage of Loans Awarded

by Rural County

“We want to let you know we are very grateful for the offer of this bridge loan. This will give us a good boost to keep our business going through these difficult times. We appreciate your confidence in us.”

- Angela & Shaun Heaton

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Rural and Urban Industries The majority of loans given to businesses and nonprofits in rural counties were in food and beverage, leisure and hospitality, and retail industries, which have all been greatly impacted by the pandemic. In contrast, the loans given to businesses and nonprofits in urban counties were more varied across industries, with many loans in healthcare, business services, consumer services, construction, and trade services, as well as a large number of loans in food and beverage.

Figure 8: Percentage of Loans Awarded

by Industry for Rural and Urban Counties

Conclusion The Utah Leads Together Small Business Bridge Loan Program was effectively deployed in an incredibly short amount of time to support small businesses and nonprofits across the state of Utah. The program was executed with the principles of accountability, transparency, and fairness firmly embedded in the application and decision making processes.

The program reached many of the hardest hit industries in the state, including food and beverage, retail, healthcare, and hospitality and leisure. It was deployed with an intentional focus on both rural and urban small businesses

and nonprofits, and successfully reached all but one county (Millard), including some of Utah’s hardest hit areas. The program reached 1,150 small businesses and nonprofits before federal or other local funding became available.

The impact of the state’s effort to deploy loans quickly and efficiently to those most affected

by COVID-19 is still being assessed, but the program has been one of the most far-reaching state loan programs deployed to date.

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About the Sorenson Impact Center The Sorenson Impact Center is an applied academic think-and-do tank focused on solving social problems through the use of data, evidence, and innovation.

Housed at the University of Utah’s David Eccles School of Business, Sorenson Impact works with public, nonprofit, and private sector stakeholders to develop and implement outcome-driven solutions to problems. Our staff of 25 includes experts in data science, finance, policy, investment, and social services. These professionals are augmented by the talents of 50 graduate and undergraduate students from diverse disciplines. Together, Sorenson Impact works with clients to marshal capital for social good, empower data-driven programs, break down silos across sectors, and equip the next generation of leaders with social purpose.

Contact 85 Fort Douglas Boulevard Building # 602 Salt Lake City, UT 84113 info@sorensonimpact.com sorensonimpact.com 801.581.6191 12