When the state of Ohio shut down in March, Mario Vargas, vice president of Akron-based Herbert USA, Inc., had to lay off 22 of 48 total employees at the manufacturer of tire molds, curing presses and building machines.
Worse, many of the company's chief customers—most of them major tire makers—were forced to shut down their tire manufacturing plants across the globe, putting Herbert in an even more precarious financial position.
Herbert paid the health insurance for those who were laid off so they would not have to go on COBRA, but Vargas had no idea where the bottom of the curve was going to be—nor when any financial help might arrive.
When notice of a loan application for the Paycheck Protection Program through the Small Business Administration arrived, Vargas said he applied for a loan in the $350,000 to $1 million range, still filled with uncertainty about the future.
"Then in April, when I thought there was some hope of it being approved, I started to bring people back," Vargas said.
Ultimately, all 22 employees who had been laid off were brought back to Herbert because of the PPP loan (which, for Herbert, was in the $500,000 to $700,000 range, Vargas said)—and it even was able to assist a major downstream customer with a delayed invoice of $500,000, allowing the amount to be paid in July rather than June.
"I could not have skipped the June payment without a PPP loan," Vargas said.
Such stories were echoed by many of the businesses in the rubber and plastics industry who received PPP loans.
Since April, the federal government has issued at least $287 million to 1,179 rubber and plastics-related businesses with fewer than 500 employees via the PPP, intended to buoy small businesses against the economic ravages of the coronavirus pandemic.
The $287 million to $640 million in loans issued—the range is broad because the six loan categories were reported as ranges per business rather than specific amounts per business—is based on Rubber & Plastics News' analysis of data about the Paycheck Protection Program released July 6 by the SBA.
The PPP loans were aimed primarily at saving jobs by providing low-interest loans to help businesses cover payroll costs and other expenses, including facility leases, mortgages and other non-payroll items.
According to the SBA, 29,629 jobs in businesses related to synthetic rubber manufacturing; tire manufacturing (except retreading); rubber and plastics hose and belting production; rubber product manufacturing for mechanical use; and "all other" rubber product manufacturing were saved directly because of the low-interest loans.
"There were many businesses who struggled immensely prior to receiving the loan," said Michael Devereux, partner and director of manufacturing, distribution and plastics industry services at St. Louis-based Mueller Prost, a business advisement and CPA firm. "They were down to the choice of whether to lay off people and close or try to stay open, and many non-tire businesses were not deemed essential and were forced to close."
And when the loans initially were issued in April, Devereux said, there was so much ambiguity that confusion reigned even with the prospect of having more cash on hand.
"I had two partners who were eyeballs deep in calls from businesses," he said. "We were on calls every morning, and every day more questions were sent to the SBA. It was literally back-and-forth everyday, and the questions moved from eligibility for the loan to loan forgiveness questions.
"Ultimately, there is no question that the PPP loans helped."
In total, $521 billion in PPP loans were given out to businesses as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act. The loans analyzed by RPN were issued in six categories: a less than $150,000 range; a $150,000 to $350,000 range; a $350,000 to $1 million range; a $1 million to $2 million range; a $2 million to $5 million range; and a $5 million to $10 million range.
In its original form, the PPP forced those companies receiving a loan to spend at least 75 percent of the money on payroll. But in early June, President Trump signed a bill that reformed PPP regulations to give small businesses added flexibility, extending the period of time businesses could use their PPP funding from eight weeks to 24 weeks; and dropping the payroll limit to 60 percent of the amount issued.
For each category of rubber and plastics-related businesses, the vast majority received loans of less than $150,000, while the fewest businesses received loans in the highest ranges, either in the $2 million to $5 million range or the $5 million to $10 million range.
The categories were reported based on NAICS codes, and loan recipients in each segment included a large number of firms that were related to the sector—such as suppliers or service providers—and not necessarily a manufacturer of the segment's main product. For example, the tire manufacturing category included only one actual tire maker, Giti Tire Manufacturing.