Paycheck Protection Program Bicycle-Related Participants

[prototoast]

Treasury released some data on which companies received loans under the Paycheck Protection Program (PPP), for companies that received more than $150k.

https://home.treasury.gov/policy-iss...oan-level-data

There are lots of smaller bike shops (and presumably many that are below the threshold), and also some bigger manufacturers or distributors. Based on a search for keywords "bike" or "bicycle", here are the ones getting more than $1 million.

$1-2 million: Bicycle Transit Systems, Inc., Philadelphia, PA
$1-2 million: Erik's Bike Shop, Inc., Bloomington, MN
$2-5 million: Giant Bicycle, Inc.., Newbury Park, CA.

Note: while I know many have been judgmental of who is or is not benefiting from this program, I don't think that is fair--presuming that all of the companies are complying with the terms of the program, they are doing what congress intended by getting the loans. I share only because it provides some interesting insights into the business of the bicycle industry.

[AngryScientist]

That is interesting, especially Giant.

We have heard here and elsewhere that companies can not keep bikes in stock they are selling so fast. i wonder why they needed a loan?

[prototoast]

Originally Posted by AngryScientist

That is interesting, especially Giant.

We have heard here and elsewhere that companies can not keep bikes in stock they are selling so fast. i wonder why they needed a loan?

Can't say for sure, but I wouldn't be surprised if they were hampered by supply chain issues--if they weren't able to import as many bicycles as they otherwise would have, or if they weren't able to process the imports at the same rate due to new safety protocols, they could still suffer even if downstream demand is strong.

Also, per the CARES Act, the standards are fairly loose for the necessity of the loan (again, not saying this is a bad thing--the current pandemic can affect a lot of businesses in a lot of different ways, and it would be challenging to create well-defined criteria that wouldn't exclude some "deserving" businesses).

Certification.—An eligible recipient receiving loan forgiveness under this section shall make a good faith certification that the uncertainty of current economic conditions justifies the loan request to support the ongoing operations of the borrower, and acknowledges that funds will be used to retain workers and maintain payroll.

[Coffee Rider]

Originally Posted by AngryScientist

That is interesting, especially Giant.

We have heard here and elsewhere that companies can not keep bikes in stock they are selling so fast. i wonder why they needed a loan?

It may also be that the surge is bike sales was not expected. I know that if I had owned a bike industry company, I certainly would not have been expecting increased sales under the present circumstances.

[Ozz]

Originally Posted by AngryScientist

That is interesting, especially Giant.

We have heard here and elsewhere that companies can not keep bikes in stock they are selling so fast. i wonder why they needed a loan?

As mentioned previously, supply chain issues could be impacting them. Also, even if the company does not qualify for "forgiveness" of the loan, it still ends up being pretty cheap capital for them (1% rate I believe).

I've heard a bunch of companies that didn't use it for payroll (as intended) but will need it to start up (buy inventory, etc) once they open back up.

[mistermo]

Originally Posted by AngryScientist

That is interesting, especially Giant.

We have heard here and elsewhere that companies can not keep bikes in stock they are selling so fast. i wonder why they needed a loan?

The PPP program had ZERO to do with need, from a profitability perspective.

To qualify, the business simply had to fall below the max number of employees allowable (per legal entity), then multiply employee monthly compensation by 2.5, capping said employees at $100K/yr, with business "loan" at $10MM.

Forgiveness of loan is 100% if at least 60% is spent on employee wages, plus rent and utilities over a period not to exceed 24 weeks. So it's not really a loan, since nearly everyone will eventually qualify for forgiveness. But it must be carried on the books as a loan, until forgiven.

[thirdgenbird]

I haven’t seen numbers. Were the sales over the 2020 forecast? I know inventory is low to non-existent but was this just a result of sales being pulled forward and the supply chain drying up? Lockdown efforts may have also impacted the mix of low margin bikes vs high margin accessories. I know many shops had/have long shop delays but is this new bike setup or higher margin service? Just thinking out loud...