Houston SBERP Impact Report

CITY OF HOUSTON SMALL BUSINESS ECONOMIC RELIEF PROGRAM

OFFICE OF BUSINESS OPPORTUNITY PROGRAM IMPACT REPORT, JANUARY 2021

ABOUT OBO The Office of Business Opportunity (OBO) is committed to cultivating a competitive and diverse economic environment in the City of Houston by promoting the success of small businesses and developing Houston’s workforce, with special emphasis on historically underutilized businesses and disenfranchised individuals.

In response to the impact of COVID-19 on the Houston small business community, OBO led the effort to create and administer the City of Houston’s Small Business Economic Relief Program (SBERP).

OBO-SBERP Project Management Team Marsha E. Murray, Director Norma Meadows, Project Manager Lalla V. Morris, Assistant Director Pearl K. Cajoles, External Affairs Manager

Acknowledgements Special thanks to the City of Houston Mayor’s Office of Economic Development, the City of Houston Planning and Development Department and Bloomberg Associates for their invaluable role in the development and success of the SBERP.

CONTENTS At a Glance ............................ 4 About SBERP .......................... 5 Timeline ................................. 6 Program Rollout ................... 8 Recovery & Resiliency .......... 9 By the Numbers ..................10 Testimonials ....................... 13

“

The City of Houston understands that the pandemic has created challenges for many small businesses, and we wanted to provide an avenue for companies that would help relieve some of their financial distress. City of Houston Small Business Economic Relief Program grants created a mechanism that businesses could leverage to assist them in sustaining their operations during the COVID-19 pandemic.”

-Mayor Sylvester Turner

AT A GLANCE

$35 MILLION DOLLARS 1,072 GRANT RECIPIENTS

95%

OF BUSINESSES HAD 14 OR LESS EMPLOYEES

89%

50%

OF GRANTEES HAD GROSS SALES UNDER $ 1 MILLION

40%

OF BUSINESSES DID NOT RECEIVE A PPP OR EIDL LOAN

OF BUSINESSES WERE AWARDED $30K-$50K

39%

OF BUSINESSES ARE IN A LOWTO MODERATE-INCOME AREA

28%

OF BUSINESSES ARE IN A COMPLETE COMMUNITY

CITY OF HOUSTON - SBERP

I

n March 2020, businesses deemed as non-essential in Houston were forced to close their doors due to the COVID-19 pandemic. A survey by the Greater Houston Partnership showed that four in ten member businesses indicated they could survive a slowdown for only four weeks or less. The survey also showed 91 percent of member businesses with 500 or fewer employees had lost revenue, more than one-third had laid off workers, and about half were not paying employees.

In a Financial Pulse Survey conducted by the Office of Business Opportunity (OBO), 58 percent of respondents secured the U.S. Small Business Administration’s (SBA) Paycheck Protection Program (PPP) funds, yet only 40 percent found those funds to be enough. Of the 30 percent who secured the SBA’s Economic Injury Disaster Loan (EIDL), only 15 percent found those funds sufficient.

In response to the grim outlook and results of the surveys, the City of Houston, led by OBO, took action to assist small businesses economically and financially impacted by the pandemic by creating the Small Business Economic Relief Program (SBERP).

The program, with an initial allocation of $15 million of Federal CARES Act funds, was presented to the Mayor and Houston City Council and was unanimously approved on July 28, 2020. Due to the overwhelming number of grant applicants and the continued need for immediate, short-term assistance to small businesses, Mayor Sylvester Turner and Houston City Council approved additional infusions of funds for the SBERP in 2020 – $5 million in September; $5 million in November; and $10 million in December.

Under the SBERP, the maximum grant amount eligible businesses and chambers of commerce were able to receive was $50,000. Permitted use of grant dollars included such things as payroll, accounts payable, rent, mortgage, personal protective equipment (PPE) for employees, and marketing strategies, including creating an online presence and other sales alternatives. Businesses were required to be located within the Houston city limits. The SBERP application portal was open for two weeks from Aug. 19 - Sept. 4, 2020. More than 12,000 businesses applied for grant funds.

To allow equitable distribution of funds and to achieve the goals of the SBERP, grant applications were not

selected for processing on a first-come, first-served basis, but rather prioritized based on categories which included, but were not limited to financial need, geography, access to capital challenges, resiliency, and job retention impact.

In addition to meeting the core eligibility requirements, applications were processed using a business profile that took into consideration such factors as three months revenue (based on business’ Profit and Loss statements and other financial documents), business size, cash flow, capital on hand, and other variables.

Grant funds were disbursed in two phases. The first half of the funds were awarded upon grant approval.

The second half was awarded after confirmation that the grant recipient successfully completed the required Recovery and Resiliency Technical Assistance component of the program. This component included assistance in strategic planning, financing, marketing and human resources management.

The SBERP helped 1,072 small businesses sustain their operations with the average grant amount totaling $30,000. Recipients of the grant included micro-businesses with five or less employees, as well as businesses that weren’t able to obtain any other type of financial assistance from other economic relief programs such as the PPP and EIDL. As of December 30, 2020, all SBERP funds were disbursed to grant recipients.

“

Our goal has always been for this program to make the most impact and to reach as many people as possible. With the additional allocations of funds, more small businesses in the City of Houston were able to remain open and pay their employees through the New Year.”

–Marsha E. Murray OBO Director

OFFICE OF BUSINESS OPPORTUNITY | Page 5

PROGRAM TIMELINE July 29, 2020 Mayor Sylvester Turner and Houston City Council approves $15 million in CARES Act 2020 Dollars to Fund SBERP (Ordinance 2020-670)

August 19, 2020 Application portal opens

September 4, 2020 Application portal closes

September 9, 2020 October 19, 2020 Recovery and Resiliency Technical Assistance component of the program begins. Second half of funds distributed to businesses upon completion of required webinars

$5 million of additional CARES Act Funds added to program after approval from Mayor Sylvester Turner and Houston City Council (Ordinance 2020-777)

November 4, 2020 Second $5 million of additional

December 2, 2020 $10 million of additional CARES Act Funds added to program after approval from Mayor Sylvester Turner and Houston City Council (Ordinance 2020-1029)

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CARES Act Funds added to program after approval from Mayor Sylvester Turner and Houston City Council (Ordinance 2020-944)

December 30, 2020 All funds for SBERP disbursed to grant recipients

“

I have had my nail shop in the same location for 22 years.

Because of COVID, we had to shut down for two months. Even though there was zero income coming in, I still had to pay all the bills at home and for the business, including rent, the electric bill and the phone bill. I’m so lucky a customer told me about the SBERP and helped me fill out an application. I had to use credit cards to survive, but I could not do that forever. After being awarded the grant funds, I was able to pay off my debt and keep the shop open.”

–Mr. Thai Do, Nail Today

PROGRAM ROLLOUT

T

he City of Houston selected Houston Business Development, Inc. (HBDi), to serve as grant administrator. A Community Development Financial Institution (CDFI) with more than 35 years of experience, the HBDi team led the development of the SBERP application portal, processed all applications including handling customer service and technical assistance, disbursed funds to grant recipients, and managed the implementation of the program’s Recovery and Resiliency component.

SBERP’S ELIGIBILITY CRITERIA • Must be a for profit business or chamber of commerce located within the city limits of Houston.

• Must have been in business for at least one (1) year prior to March 1, 2020.

• Must provide evidence of how business revenue has significantly decreased because of government restrictions or other challenges due to COVID-19.

• Must have generated $2 million or less in gross annual revenue pre-COVID-19.

• Must be in good standing regarding City requirements (e.g. property taxes, personal property, grounds for debarment, etc.).

• Must commit to completing the Recovery & Resiliency component of the program.

In addition to meeting core eligibility requirements and to ensure the equitable distribution of grant dollars, as well as to achieve the goals of the program, applications were prioritized based on:

SOCIAL MEDIA OUTREACH: Two daily posts on OBO’s social media channels directed Houstonians to the SBERP application portal, www.cityofhouston-sberp.com.

With targeted outreach and media coverage, information about the availability of grant funds for small businesses reached constituents residing in all City Council districts. The Office of Business Opportunity also embarked on an aggressive social media campaign with assistance from HillDay Public Relations, Inc. During the application period, two daily posts on Instagram, Facebook and Twitter directed Houstonians to the application portal which received more than 12,000 grant applications. The HillDay team, a womanand minority-owned business enterprise, included Argentina M. James, president and CEO, and her public relations team - Ronnie Piper, Ron McFarlane, Russell Gallien, Samar Quinn and Vanessa Vidaurri.

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Geography: Business location to ensure that historically disenfranchised businesses have equitable access to funding.

Employee Makeup: Businesses that employ low- to moderate-income Houstonians and businesses that have 10 or more employees (for job retention).

Legacy: Businesses that have been in operation for 5 or more years.

Resiliency: Businesses that demonstrate, via their Recovery and Resiliency plan, that they have a strong chance of surviving during and postCOVID-19.

Challenges with Access to Capital: Businesses with demonstrated challenges obtaining business financing through traditional financial sources.

RECOVERY & RESILIENCY

W

hile the primary goal of the Small Business Economic Relief Program was to provide immediate, short-term financial assistance to small businesses and chambers of commerce severely and negatively impacted by the pandemic, it was also important to provide these businesses with advisory and capacity-building services that would help with their economic recovery and build their resiliency. In order to receive the second half of their total grant award, businesses approved to receive funds from the SBERP were required to complete the Recovery and Resiliency component of the program. Grant recipients were required to complete a series of four 1-hour workshops on topics such as strategic planning, finance, marketing, and human resource management.

Arquella Hargrove

Epic Collaborative Advisors

Kyra Hardwick

The Kyra Company, LLC

RECOVERY & RESILIENCY WORKSHOPS Presented by Arquella Hargrove of Epic Collaborative Advisors and Kyra Hardwick of The Kyra Company, LLC, both minority- and women-owned small businesses, the SBERP Recovery and Resiliency workshops covered the following topics:

THE RESILIENT BUSINESS OWNER:

PEOPLE, PROCESS & PRODUCTIVITY:

SECURING THE BUSINESS:

NEXT STEPS TO BUSINESS SUCCESS:

Understanding risk and designing a business resiliency strategy.

Effective communication and the importance of a marketing plan that increases a company’s visibility.

Leadership capacity, managing during a crisis, and how to guide a team to recovery.

How to enable ongoing operations before and during a business interruption.

“

When COVID hit in March, we lost more than 75 percent of revenue on contracts. With the help of SBERP grant funds, we were able to sustain our operational costs to keep the doors open while we invested in marketing to reposition our company. The Recovery and Resiliency component of the program was also very helpful and thoroughly efficient in explaining how to lay the groundwork to set your business up to continue to operate in crisis and emergencies. We have executed the business strategies that were presented and are very grateful to have received the SBERP funding.”

–Carolyn Mitchell Millennial Staffing Solutions, LLC

OFFICE OF BUSINESS OPPORTUNITY | Page 9

BY THE NUMBERS GRANTS BY COUNCIL DISTRICT The SBERP reached businesses across all City of Houston Council Districts, with most recipients being in Southwest Houston. Of these businesses, 28% were in a Houston Complete Community and 39% were in a low- to moderateincome (LMI) area.

COMPLETE COMMUNITIES

Page 10 | SBERP IMPACT REPORT

LOW-TO MODERATE-INCOME AREAS

NUMBER OF GRANT RECIPIENTS

AVERAGE GRANT AMOUNT

GRANTEES WITH ≤ 14 EMPLOYEES

1,072

$30,000

1,014

ANNUAL GROSS SALES Grant funds benefited 75% of businesses with less than $499,000 in gross sales per year. Small businesses in Houston with 14 or less employees received 95 % of SBERP funds. Grants between $30,000-$50,000 were awarded to 50% of businesses, with the amounts representing threemonths of operating costs prepandemic.

NUMBER OF EMPLOYEES

GRANT AMOUNTS Grant Amount

Application

Percentage

$0-$10,000

250

23%

$10,000 - $20,000

177

17%

$20,000 - $30,000

108

10%

$30,000 - $40,000

79

7%

$40,000 - $50,000

458

43%

Total

1072

100%

OFFICE OF BUSINESS OPPORTUNITY | Page 11

BY THE NUMBERS (cont’d) PRIMARY RACE RACE

% OF APPLICANTS

Black/African American

34%

Asian

21%

Did Not Provide

15%

Hispanic Latino or Spanish Origin

14%

White

8%

Middle Eastern or North African

4%

Other

2%

American Native or Alaskan Native

<1%

Native Hawaiian or Pacific Islander

<1%

Total

TOP 4 INDUSTRIES

Businesses in the food and beverage industry – an area largely affected by the pandemic – represented the highest number of applications selected to receive grant funds.

Historically disenfranchised business owners with challenges in access to capital constituted the majority of grant recipients.

100%

1. FOOD & BEVERAGE 2. AUTOMOTIVE 3. HEALTH & PHARMACY 4. BEAUTY

NATURE OF BUSINESS

RECEIVED FINANCIAL ASSISTANCE

FROM OTHER BUSINESS RELIEF PROGRAMS

*NPS: Non-Professional Services

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TESTIMONIALS

“

COVID affected my business by causing a drastic slowdown in customer foot traffic.

Hence, we were not able to receive the normal level of revenue needed to pay our basic business and payroll responsibilities. A few of the ways we used the funds received were to catch up on past due bills, keep workers, and purchase badly needed inventory.”

-Bernard Johnson, The Bridge Imports

“

The SBERP grant gave us the fortitude and protection to enter into a traditionally slow fourth quarter and to ensure our strength to capitalize on 2021’s fitness resolutions. This grant was a welcomed supplement to our working capital needs for the new year and provided a safety net for the company to continue to employ the majority of our staff and instructors at all locations. Our team’s mental health is at the forefront of all we do. We are striving to change the human capital landscape of Houston’s boutique fitness industry to provide employees with fair and legal compensation. This in turn, affords our team the financial and mental confidence to continue to offer the best fitness experience to our community.”

–Jess Hughes, Citizen Pilates

“

The SBERP has made an immeasurable impact. It helped sustain our business when there was a very real threat of how it would survive. From mid-March to mid-May, our stylists were not getting a check or tips, and we didn’t realize how long it would take for us to be able to open again. I can’t tell you how excited I was to be selected for the grant, to pass on the news to our employees, and to tell them that we were going to be OK for a little while longer. We also didn’t realize that we would still be in this pandemic a year later, and even though our stylists have returned to work, our revenue is 40-50 percent of what it used to be. Without some sort of help, you can’t survive with 40-50 percent of the revenue but 100 percent of the bills. SBERP literally helped save a business.”

–David Dalati, Supercuts Franchise

OFFICE OF BUSINESS OPPORTUNITY | Page 13

The Small Business Economic Relief Program Impact Report is produced by the City of Houston’s Office of Business Opportunity.

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