Owner of Avalon International Breads warns of instability of payment protection program in 'New York Times' op-ed

In an op-ed published by The New York Times on Tuesday, Jackie Victor — founder and owner of Detroit's Avalon International Breads — addressed glaring issues with the Small Business Administration's Payment Protection Program, a loan forgiveness program designed to keep businesses afloat by keeping workers on the payroll.

Victor co-founded the flagship Cass Corridor bakehouse in 1997 with just $6,000 from family and friends who purchased vouchers called “bread dough dollars,” which could be turned in and used towards the bakery's first loaves. In recent years, Avalon has expanded its footprint, opening a full-service restaurant in downtown Detroit, a cafe in Ann Arbor, and growing the wholesale side of its business by delivering to more than 100 restaurants and grocery stores in metro Detroit and plans for state-wide distribution on the horizon.

However, Gov. Gretchen Whitmer's March 16 closure of non-essential businesses, which limited restaurants to take-out only services, was quickly followed by a state-wide stay-at-home order for Michigan residents. Victor said Avalon went from employing 135 people to one, the company's chief financial officer, while her storefronts and cafes went dark. Several of her employees had been personally impacted by the virus, some through the death of loved ones, others, including two management employees, had even contracted the virus.

Last week, Avalon was elected as one of the few businesses eligible to receive the benefits promised by the Payment Protection Program, which burned through all of its allocated $349 billion funding just weeks after being introduced. Multi-million dollar companies that were granted PPP forgiveness loans — like Potbelly, Shake Shack, and Escalade — came under fire and quickly returned the loans. Victor said the program does not provide certainty that small businesses, like Avalon, can survive.

For one, Victor says, the loan is intended for one purpose: payroll. Not operational costs, overhead, or debt businesses may have accrued since shuttering or scaling back services. The loan amount must be spent within 60 days and must be spent on hiring every employee back.

In other words, should Avalon be able to hire all 135 workers back, the loan is forgiven. If they are unable to do that, however, the money not forgiven by payroll must be paid back, in full, in 18 months. As Victor points out, there is a strong likelihood that Avalon and other small businesses may not be able to keep those people on staff for the full 60 days due to reduced consumer demand and record number of American's filing — and waiting — for unemployment benefits. This, Victor says, could hinder the recovery of the economy as a whole, leaving businesses not only scrambling to maintain operations but, now, repaying a loan.

Victor says the solution comes down to stronger oversight of banks and corporations and reconfiguring the terms of the loan program. She suggests loans be extended to 120 days versus 60 and that the number of required staff should be reduced to 70% of pre-coronavirus staffing. Victor also says businesses should be granted five to 10 years to repay the unforgiven portions of the loan, which should not be exclusive to payroll costs, but should be able to cover other operational and financial needs to better the future stability of the business.

You can read the entire op-ed here.

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