Problems plague coronavirus state small business grant program as desperation grows

Published: Jul. 3, 2020 at 2:55 PM AKDT
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Desperation is growing among small business owners across Alaska as a state coronavirus grants program is plagued with problems.

grants program started operating in June with the goal of getting $150 million out to small business owners in its first month. As of June 30, less than $6.5 million has been released.

The grants are being operated by the Alaska Industrial Development and Export Authority (AIDEA), working in partnership with Credit Union 1. The House Labor and Commerce Committee heard on Wednesday that AIDEA has received close to 2,000 applications for loans and less than 10% have been approved.

“I think it can’t be overstated that businesses are desperately in need of financial help right now,” Jon Bittner, the executive director of the Small Business Development Center, said.

Bittner said the center had surveyed over 200 small businesses and only four had received state grants.

“One lady said she had lost her business and her house and is couch surfing now,” Bittner said.

Dozens of business owners called into Wednesday’s committee hearing to share their frustrations; many were exacerbated by the restrictions on state grants that could help.

“There’s not enough customers coming in, there’s not enough money in the economy to save these businesses,” Bittner said. “There’s too many restrictions and too many uncertainties.”

Part of the problem comes from which businesses are eligible for the grants worth between $5,000 and $100,000. The

said that businesses that took small federal loans could receive state help but that process will now be challenged in court.

Eric Forrer

in May, challenging how the Legislature appropriated Alaska’s share of

In late-June, Forrer filed a preliminary injunction, challenging the legal advice that would expand the eligibility for the small business grants.

The Commerce Department has now stopped giving loans out to small businesses that had taken small federal loans until July 13. Oral arguments on the preliminary injunction are scheduled for July 9.

Joe Geldhof, an attorney representing Forrer, said his client would accept the eligibility change if the Legislative Budget and Audit Committee voted to approve it.

“The Legislature is already on shaky ground having ceded its appropriation authority,” Geldhof said. “That’s a recipe for arbitrary expenditures of public money.”

Another concern is that businesses that have taken larger federal loans may still not survive. Many that called into Wednesday’s committee hearing are struggling despite federal help.

“What we’re hearing from small business owners in Alaska is a sense of frustration and a sense of desperation,” said Rep. Ivy Spohnholz, D-Anchorage.

Another House Labor and Commerce Committee hearing is scheduled for July 9 on possible next steps to change the state grants program. Discussions about whether the Legislature may need to reconvene and change the law are expected.

Rep. Lance Pruitt, R-Anchorage, said the Legislature reconvening could happen but he wanted debate to be focused.

“My colleagues are saying, ‘Let’s go and fix all these different things,’ and they start getting in their little priorities that aren’t specifically that issue,” he said.

Business owners calling into the committee hearing on Wednesday had four possible solutions to make the grants program work effectively:

  • Allow any small business owner to apply for grants, regardless of which federal loans they’ve received
  • Allow commercial fishermen to receive grants as they are currently ineligible
  • Allow 501(c)(4) nonprofits to qualify for grants
  • Give AIDEA and the Commerce Department the flexibility to make changes as different concerns arise

Spending money locally is said to be vital in the meantime.

“I can’t stress this enough, support your small businesses,” Bittner said. “Find ways to put money into the hands of the entrepreneurs in our community, it’s getting pretty desperate.”

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