Welcome to Strictly Business Varieties, weekly podcast featuring conversations with industry leaders about the business of entertainment. I'm Cynthia Littleton, business editor for Variety Today. My guests are three top entertainment bankers from City National Bank who have spent the past three weeks dealing with a blizzard of loan applications for the federal government's paycheck protection program. Martha Henderson is
Executive VP and Manager of Entertainment Banking. Lorie Badgett is Senior VP and team leader, specializing in Nashville and the music industry. Stephanie Dalton is Senior VP and team leader specializing in Broadway. The three breakdown the details of the Small Business Administration's payroll relief program for businesses with five hundred or fewer employees. We spoke last week just as the initial three hundred forty nine billion allocated to the program ran out, but now it's poised for a new
influx of funding as early as this week. The industry veterans also discussed the scope of the need out there and how they are advising clients through an unprecedented crisis.
Martha Henderson, Lorie Badgett and Stephanie Dalton of City National Bank, thank you so much for taking time out on what is an insanely busy time for the three of you to give Variety listeners a sense of the scope of the Paycheck Protection Program, which is an unprecedented federal loan program that kicked in a couple of days ago, and as I understand it, you three have pretty much not
slept since. Let's start with you, Martha. Let's talk about what the significance of this federal program means and what kind of need you have seen from your clients in the entertainment arena. Uh, it's certainly this is unprecedented, and I've been working with the entertainment in industry as a banker for more than forty years and this is the
first time we've ever come across anything like this. So it's completely new for the clients and it's completely new for us, and it is um We are trying to make sure that the companies that we deal with within the entertainment industry survive and and get through what is
an unprecedented time. So the government came up with this p p P program and we are doing We did do everything we possibly could to get this program to as many people in the industry as possible, and truly the bank did that throughout the rest of the bank, to anybody that's in our community. We were trying to do an outreach, and I think the bank as a whole and the entertainment department we stopped everything that we're doing.
All two d and fifty colleagues that we have were almost to the person, focused on getting as many applications as we possibly could could get. And that's because we knew there was a time frame that the money was going to run out, and so we wanted to get as many through as we possibly could so that these companies can pay their colleagues and get them back to work and we will all be back up working as quickly as possible. So that's our hope, and that's what
we were focused on and what we were doing. Mm hmmm. The to Martha's point, I was just gonna add, it was really sort of a true team effort just across the bank to kind of move mountains to get this done for clients. It was our operation. Folks are bankers, um credit folks, the leadership team, everybody just really came together and in sort of the CNB Way. Um of just um getting out there quickly for our clients, helping them through the process, answering questions, helping them figure out
how to fill the forms. Um. You know, these were a lot of people that really wanted the money and and it was very important to them. So we just really pulled together as an entire division. Um like nothing we've ever seen before. Again, to Martha's point, it's it's unprecedented,
but that's kind of it was just an amazing effort. Uh. And I think we saw so many you know, we received so many emails from from clients just recognizing how important it was and how much they appreciated everything we did. That was really it really felt made us feel very rewarded for everything that we helped them accomplish. And Stephanie, you work in the Broadways, in the in the area of Broadway in banking, what specifically did you find what
was the specific need in the Broadway community. Well, it was you know, um, it was really sort of the similar need that that companies needed across the entertainment industry. I mean, everything just completely came to to a close, and you know, the opening of Broadway is still unfortunately uncertain at this point. So a lot of the production companies and general management offices needed assistance to kind of stay aflow and take care of their employees and keep
their employees um going. So it was it was very much similar in terms of the rest of the industry. M HM and Lorie, you are coming to us from Nashville to how is Music City dealing with this? Wow, music City has been really hit hard. Um, as you're well aware, over the past five to ten years, Nashville itself as a community has been booming like nothing I've
ever seen. I'm a Nashville native, and I've never seen this much growth and and so much happening in the town, both obviously on the entertainment side, but also just tourism and people coming here. Um to have Broadway and all of our honky tonks shut down, I mean, that's such a vibrant place. Um. You know, our Country Music Hall of Fame is closed down. UM, never mind, just on the music side, every tour has been canceled and postponed to the fall, and we just hope and pray that
we can congregate again in the fall. You know, it's again, it's just this uncertainty that everybody feels no matter what you know, the government says, if we're open or not open, you know, what do we feel as a community, Where do we feel safe? And how do we make um
these places? And touring has has been the lifeblood of the music business since the beginning, but especially with streaming and and you know, record sales going away, the touring has always been the mainstay, and now that's in jeopardy. So um. I think it's been really interesting and fun as a fan to see how musicians and and artists are doing these at home concerts and things. But you've
got to know they're not making money. So if you're a fan of any artist out there that's doing these things and and giving you your sanity during this time that we're all locked at home, you know, by their merchandise, by their records, you know, support these artists because this is this is their livelihood, and this is what they do and they're giving you free entertainment. So there is so much pain out there. Martha, Can you talk us through, as you did the other day to help me greatly
with the story. Can you just talk us through the bare bones of what the paycheck protection program offers and who it's for UM. It's for companies that have colleagues of less than five hundred five or less. That probably should say. And what it's trying to do is keep America working and these companies up and running and these small businesses. And so people are able to apply to be reimbursed from the federal government after a period of
time for the colleagues that they keep working. So if they have ten colleagues or a hundred colleagues, it doesn't really matter. They can apply to have their payroll covered for that period of time. So that's one dollar amount. And then there's some additional kinds of addition of UM refunds that they will make. They really get into it's very specific. But in addition to that, you also can
apply for rent and UM utilities. Now that yet rent and utilities are not granted or refunded to you at at at the end of the time, but if you are able then to keep up with your payments, it does allow you to pay. You can use up to of the dollar amount that you ask for for rent and UM utilities, and then they'll turn that out over a period of time at a very low interest rate. So most of the people that we're seeing are applying just for the UM, the payroll portion of it, so
that they can keep all of their colleagues. And that's one of the rules. You have to keep all of your colleagues working for an eight week period of time. And that's what you're applying for, is UM eight weeks worth of payroll, and that it will be at some point in the future that you'll be reimbursed or you just won't have to pay that portion back. It will be it will be re burst and pay off the loan so that you don't have to pay off the loan. The loan is at one percent interest rate, so it's
a very very favorable interest rate. And UM it really is making a huge difference for these companies there. They really want this, They really want their colleagues to get back to work and be able to have that staff so that hopefully in the next six to ninety days America's back a lot of these companies are back out
working again. And what UM for any of you, Like, how are people even sort of determining the amount that they might want to apply for given that it's so hard to see the end of when you know, when this crunch and this lockdown and the shuttering of all of these venues and productions may come back. How do you plan for something like that. Well, for the loan program there it's very specific. They're going to give you. They're going to pay for two months worth of payroll,
and so that's what you're able to apply for. As I said, there's a little bit of you know, adding and subtracting. You you can't have colleagues paying colleagues over a hundred thousand dollars. Those get subtracted to subtract everything over the hundred thousand dollar levels. So it does get very specific about how you calculate this, and we can
help the client walk through some of that. Those are some of the conversations that we have with them, and so do their c pas and business managers and people like that help them very much and putting this all together. But that is what this is covering. At this point. We suspect that the government's going to do have Plan B. There'll be another plan that will be coming out, you know,
over over time. We don't know when that's going to be, what it's going to look like, or who's going to qualify for, but there's other programs I know that the government. M Uh, Stephanie or Lorie, can you give a sense of the amount the dollar amounts that some of your clients have been applying for, just trying to get a sense of the range of need. Well, it's really it's been, it's been all over again. It depends on sort of payill size of the company and that that determines what
they qualify for. So it could be as small as you know, ten thousand dollars, even five thousand dollars, and then we've had larger requests. I think the maximum might
be ten millions, not not, is that right? Yeah, so the maximum loan is ten million, but I would say, you know, our average size was was far less than that, so we had you know, we may have a few of that would apply that high, but really the average size was probably a couple hundred thousand, I would guess, Martha, right, it might be in the three food allar range, but around Yeah, So it's that's that's pretty much, you know.
So you think about that, that's that's eight weeks worth the paywall for many companies, and so you know you're covering probably fifty colleagues and at that point, LORI anything anything that you're UM seeing. In terms of scope of the need, it's like Stephanie said, it's all over the place. And based on the entity, I will say that we've had a lot of UM, blood, sweat and tears helping our nonprofits. That's been a real focus for the whole bank UM. And of course nonprofits can meet anywhere from
five thousand dollars to twenty thousand to UM. You know, a hundred thousand. Nashville probably has a lower UM level as far as average loan size. But you know, when you think about every touring artist has a corporation and they have employees to take care of of these tours that have been planned for a year in advance UM and production costs and everything else. UM, and now it's just stopped. You know. UM, this is just such a
a net that is so needed in this space. I mean, I'm thinking it could go down to as you know, in terms of the costs, it could be. It could be as granular as you have an artist that has had a hundred thousand t shirts printed up that says tour, and it might at that tour may not even happen until too or you know, till I mean, I'm a thing that that for all of you, your clients are are having to think about different you know, just different scenarios and what what again, what the need might be.
Help me understand though, from what you're saying, it sounds like there are some kind of criteria as to the amount that a company can apply for. Is it so it's based on like existing payrolls? Is that? How? Yeah? You are. Yeah, there's a specific sort of calculator that they use based you know, looking on sort of the historical payroll that they were carrying, and there's a calculation
off of those figures. So you can you can't just have said, you know, oh, I this is a business like you have to have obviously you have to have a track record and you know, yes, you had you had to be in business I think before a date and it's like February twenty or something that this you had to be in business and had to have had
payroll by that. So, um, yes, there's some as I said, there's some specific kinds of qualifiers that go along with all of this, and that is what these the two officers that are on this call This is what they did all day long, was trying to help walk people through, Yes, you'll qualify for this, but you don't qualify for that, and you need to take out this and be sure that you don't do that, and and walk them through.
And then there's you know, they ask for documentation and people are helping them with obtaining that documentation to apply because the s B A it is it's an SBA loan to them, and they want to see all the right things because they want to make sure they're actually giving the money to someone who's in business and is using it prepareroll and to you know, their company to thrive and survive, um, not just um someone that came in off the street that we don't know and can't
prove who it is, and that they're getting the money. So that's exactly what we're trying. That's we're kind of the frontline for the for the s B. Yeah, and really I was going to say the difficult part of all of this was it was a brand new program, right, so it was eight three pages that we had to study ourselves and figure it out with the client and go that sounds right, but you know, let's check this and that and get pieces of paper and ask the questions.
And keep in mind, we're doing all of this. Most everyone's working remotely right now, serybody's at home trying to You can't walk to the office next door and say, hey, is this how you're doing it? Is this what you're seeing? Is this? I mean it was totally everybody kind of jumping in. Like Stephanie said, it was just a herculean effort of everybody coming together on the credit side, on the deposit side, on the loans. I mean, it was like every part of the bank has been involved with this.
Did you find that this is especially smaller companies sometimes aren't, but they're certainly not as rigorous with record keeping and accounting. Was this something that people had to scramble to put their hands on or was it that the documents and information needed was something that you know, any professionally run company would have on hand. You know, it's all over
the board a little bit. Because if there are a small company that didn't necessarily have a CFO or a you know, a cp A that was helping them, they might they might need more help. But most of our clients do have a business manager or a c p a someone that is sort of helping helping them through that. So fortunately we could kind of intermediary with their advisors as well and make sure that they got completed correctly, which you know, the advisors were a big part of this.
They really did help. Um it made the process much more simple for their client. Would you say that there was awareness among your clients that this that this particular pot of money. I mean, we all read the headlines about the two trillion dollar stimulus bill, but you know, the very breaking down the components of it and the hey you could apply for this. Was that kind of your job to educate your clients or did you find people calling you and they knew about it and they said,
help help me do this. I'm gonna let the two of them. Yeah, I mean they they you know, everything literally just came to an halked so you know, the I mean, the brakes went on right away. So I think everybody all of a sudden was thinking, well, jeez, where can I go to to have some belief or some help. And they knew about the program, and I guess the question was was city national participating right? Because not every not every bank participated in this SBA program.
So once they first ball was are you participating in this?
And then the answer was yes. And then that's when we really joined at the hip with these clients not in those trenches, and just kind of worked this throw and figured out how to get the applications builed out and submitted, because it was very much of a first come first sort of kind of basis in terms of getting those applications in as quickly as we could process them as quickly as we could before um, you know, we knew that eventually the fund would run out, so um,
it was a lot of hard work and a great effort across the line to really just move it, move it along quickly as quickly as possible. M hm, that's true. I agreed it was. It was a floodgate of people, you know, it was. It was literally around the clock work, um, trying to get everything done for everybody that needed it.
But loris that you represent in music, a lot of artists are their own you know, uh, cottage industries, unto themselves, and that there even even there, there was awareness that this program that they could that they could be a part of it. Absolutely, and some of it was um, like Martha had mentioned through the business management community that was a large driving force. UM and you know, otherwise
it was word of mouth. And and honestly, even with the New York and the l A and the Nashville Uh, you know, it's really a small industry when you boil it down, no matter geographically where people are located. UM, word gets around fast, um on something like this, And and we were just glad we were able to get
everything pushed through. And and just to follow up on Lorie's point in terms of being a small industry, I mean, we've always had this hometown feel as a bank, uh, in terms of how we take care of our clients and the level of service we bring them. And I think that the way this was managed for them was just sort of an extension of that philosophy that we've always had because we've always taken um a great amount of pride in giving back to the communities that we're in.
So um, you know, during such an unprecedented, unprecedented time, it's extremely you know, it was extremely important that we found a way to give back now. Yeah, And and to that point, you know, with the two million dollars the bank gave to the different communities for the country
music community. We actually contributed to uh, the Academy of Country Music has a Lifting Lives charitable arm um for COVID nineteen and we've given out over a million dollars to hundreds of people within five days, UM in the music community, who are musicians, who are songwriters, who are people who may or may not make rent, you know. Um. And and that was a perfect example of the country music community pulling together very quickly and getting this money
literally in the hands of people back quickly. UM. So it's really a proud moment for us. We've seen in you know, amid all of this, we've seen incredible acts of generosity and kind of let me ask you, what would be for a bank, what's the what's the bank calculation in terms of do I want to participate or not in this? It would seem like at this time it would be it would be hard for a bank too, it has commercial client to to not participate in something
like this. Well, you know, UM, we've all kind of talked a lot about the sheer volume of this and and really truly we did shut we did shut down to the department and did this for three weeks. UM. So it means that you have the ability and can do it and take it on and so many you know, I'm saying many, but some institutions just said, hey, I don't have the ability to service the client and get this done reasonably. UM, And so I'm not going to participate.
That's just my guess. I think that's that's really it. UM. And we all came together in a very short period of time. I think we are very very fortunate in this division, and that we have all work together more than ten years, and many of us more way more than that, UM. And so we have a shorthand with each other. I can say something and the two women on this call, well, oh yeah, I'll call these three people and get that taken care of. Because we kind of know what to do and how to manage things.
But we've been doing it for such a long period of time. We walk, we kind of walking and say, well, we say the same things, we do the same things. It's probably the hardest part for us is that we're going to have so many to now document our normal level of service will not we can't. We just it's going to take longer time to get some of these
pieces of paper back out now to the client. So that's probably the hardest thing that the three of us would tell you, you know right now is Okay, we're not going to get to turn documents in twenty four hours. We just can't. Now, it's going to take three days or whatever the time frame is to get all of these documents typed up out two people and then back again. M hm. Now we're talking on April seventeen, and two days ago, Treasury Secretary Steve Manuchin basically said announced that
this particular fund is out of money. From what you're saying, you you all clearly knew that it was going to be a race, a race to get that money. It sounds like that a lot of what you were telling your clients like we don't have time to we don't have time to waste. You you you knew from your I'm guessing from your experience with Treasury programs and such that you knew that people that it was going to
be a first come, first served type of situation. We knew there was a dollar amount that they had and that if we wanted to get the community out, we needed to do it very We need to mobilize fast and get it done, and that's exactly what we focused on. UM. Right now where there's reports that you know that that Congresses is obviously looking at stimulus part two, right, UM, do you I realize it's a hard, hard question, but just from working with it now you know for solidly
for three almost three weeks. Do you have a sense so the initial grant for this program was three dred and fifty billion, do you have a sense of what the what the need out there could be like? Could they could they need their need for another billion? Does it need to be more than three another three billion? What do you think? Um? You know there's a very
different program that's out there for the larger companies. Not the largest companies for sure, but there's the next trench of companies, which you know, there's a lot of colleagues that work in those companies and that's really what we're trying to do is keep people working, that's for sure.
But I couldn't even come from close to guessing. I can tell you that the next one may not be exactly the same people that will qualify who you know, I don't know exactly what they're going to be doing, but clearly there is a larger need than what has been filled with the first time. There is no question whether it's another tranche the same size that probably could be eaten up pretty quickly without thinking. Um, but you know what the number is, I don't know and whether
that's the right answer. You know, certainly there's states, um, states that are doing different things and cities that are doing different things, and so you have to look at all the various opportunities that are going to be coming out there, and people are trying to come up with answers, and I applaud that because this is clearly going to be an unprecedented time and how do we face this and how do we get through it? Do you do
the three of you? Do you have clients that would have liked to but just didn't get there in time to in the PPP? Yeah, yeah. We we literally received packages the day that it got cut off, and we couldn't you couldn't have processed all of the ones that we had, so and there were other clients that said, oh, I'm going to get it in you guys know that's right now. Absolutely. I wouldn't say there was a high
volume of those. I think we we we really, we really got a lot through for our clients, but there there were some that just started trying to enter it in and it was it was done, The fund was was was out. Yeah. And in terms of like did the Treasury Department like send you an email or like how did did they let you know or did you learn from Steve Manuchin when he announced it to the world.
I think you want to go him. We knew we could tell by what the dollar amounts were each day, so you kind of knew that it was going down, right, guys, you were looking at them and yeah. And then so I had kind of predicted Wednesday. I was worried that it was going to be Wednesday, and it made it till Thursday. So I think we got another twenty four hours.
I was that's great. Yeah. Are you um, I mean, I would imagine again, in this crazy unprecedented time, are you at the point of even being able to advise clients a little more long term on like, you know, in addition to the whatever federal programs may come, like you know, planning how to you know, how to plan for reopening, how to plan for maybe reopening on a smaller scale kind of thing. Are you even at that
point of conversations with clients. Yet I'm like, yeah, I think, yeah, I think those are a lot of conversations that the individual industries you know, are having. I mean, I'm sure you know, Broadway has lots of different meetings, lots of different task forces figuring out, you know, how do we open up, uh and keep the safety of you know, it's not just the audience. It's the actors and actresses and you know who are on the stage. It's the
musicians and the orchestra pit. A lot of people, um, you know involved with those lights going on on Broadway. And so I'm sure everybody's studying a lot of different scenarios figuring out when is really the right time and really um looking to you know, uh, government and testing and all sorts of things. It's it's you know, it's going to be an interesting process to see how they kind of arrive at when it's when, when it's ready, you know, when when when they can open and what
that will look like. And I would imagine just again from a financial you know, from an individual company type of financial perspective, there's got to be an expectation that there will be additional costs. You know, if a Broadway theater has to you know, take temperature swipes as people
walk in the door. You know, somebody's got to pay for that service, and that I mean, I'm just thinking the more you think about it, that the costs and the the ramifications of opening even at an individual company by company, not you know, sector wide obviously a lot of planning and things, but just for individual companies, the level of unknowns must be so must be very difficult right now for people trying to plan to run a business.
That's right. And I think different age brackets have a different thought process about when they'll go get in in a large group. Like I might think that it's harder to get into a large group, but um Lori's uh daughters, Stephanie's son would definitely feel like, well I could do that. You know, they're they're they're just you know, the younger you are, the less you're going to be as subject to fear factors. I think, mm hmm, Laura, you were going to say, I was just gonna say, I think
the fun part is working with creative people. I mean, the ideas are just unbelievable in how to manage this. Because I mentioned the A. C. M. S earlier. We were supposed to have a live award show April five in Las Vegas, right, and so you know that got postponed into September six, and will we be allowed to
gather by then, you know, we hope so. Um. But in the meantime, within a four or five day window are producers pulled together and a wonderful at home show that still aired on CBS, and you know, I don't Country music just just really gave people an insight to the different artists living rooms and their children and they're playing and it was just it was a really special moment that that this community needed really badly, and the
fans could not have loved it anymore. So I think the creativity comes out and you start figuring out, Okay, well we can't do what we've always done, so how are we going to do it? And how are we gonna make money doing it? Right? That's the that's the difficult part is figuring out the financial side of things. Because our creatives are so you know, their their ideas are endless, but it's like, how do we monetize it? And how do we keep food on the table? That's right?
And you know, my family was, you know, keeping keeping track of commenting on every single person that was on on that show and oh did you see this? Did you see that? So there is this opportunity to maybe do things differently without everybody getting in a stadium all at the same time. So we don't all I mean, we're all talking about this. We don't know what the
answer ultimately will be. I just think there's a lot of hope when you see a show like that where there is a way of monetizing that if if smart minds get together and figure out Yeah, and it's big business. I mean when you think about an artist and you think about their management companies and their agents, the booking agents, you know, I mean like the amount of people that it takes to get one too or up and running. It's it's hundreds of people, um that actively work on that.
And then it's like nope, never mind, you go okay. So it's just been heartbreaking. Is there anything else, anything existing, any other existing federal programs or state programs that you know of that could be helpful for small business is
at this time ongoing? You know, not maybe not something as specific as the p p P program, but any any you know, business development or or sources of funding that you're aware of that might that you think might be important first for small businesses in the entertainment space. I know that there was another spam program. I think it was the relief program that was available to clients, which was completely separate from the one that UM we
participated in. And I think it was a program where you just went directly to the s b A and you didn't need a bank as an intermediary. So I know that was another option through the s b A. UM and you couldn't get this loan if you've done the other right, right, Yeah, gotcha, And otherwise it goes back to our nonprofits. And you know, Music Health Alliance is a total health care based organization that helps anyone
in any genre. Music Cares again has has done an amazing of taking good care of anybody in the music industry that falls on hard times, during a pandemic or otherwise. UM, and then you've got UM. You know, all these different organizations have a charitable arm and they're always looking for the right people to help. So these are perfect instances.
And thankfully where we sit, we know who needs the help and can legitimately stand up for and go to these organizations and say, you've got to help this person because there's there's nobody else who can. Even if we can't as a bank, you know, for our guidelines and regulations,
we at least have places that we can go. Do you have a sense in terms of um the companies again, the smaller you know, five and fewer employees, how many of them were basically in a strong position until this incredible black swan you know, came into the came into the picture. I mean, do you feel like they, for the most part, this was a healthy industry. This is
a temporary shock that they will get over. Do you think we're going to see a lot of business failures coming out of it, you know, businesses that just won't restart or just won't be able to get their legs once once the you know, the social distancing guidelines are a little east. I like to think optimistically that again, touring was the backbone of entertainment and now that's been challenged. So I think we're going to find new ways to
make money on in music. And I think all of us again who have been home for so long, uh, you know, music is one of those things that helps you through, whether it's you know, going for a run and having your music with you or or whatever the case may be. But I like to think that we'll find a way. And like I said, for Nashville community, Nashville was so strong before and had never experienced a boom like we've had the past five or ten years.
And now it's at a standstill. So Nashville will rise again. We had floods ten years ago, we had tornadoes, deadly tornadoes early March that flattened commune of these and music venues and you know, and and then this on top of it. Um, But somehow, you know, these communities just pull together and we figured it out and we take care of each other, right. And I would say it's
similar similar to Broadway. I mean, they had a few really strong years heading into this, so um, you know, January and February typically slow months, and then it closed in March. But hopefully, um, there are a lot of strong shows out there, have big advance ticket sales that
will help, you know, sustain them. I think the real question is what will happen to those shows that that were either in previews or in rehearsals, and you know, That's where there's a bit more of a question mark in terms of, um, will those shows have the financial ability to sort of sustain the shutdown and then open when it's time to eventually open. But um, it's sure will be great to walk into a Broadway theater again, and you know, I mean, the demand is going to
be there. The demand will be there. It's just a question of getting everyone feeling safe to go, I think. Martha, Lori, Stephanie, thank you so much for your time and for your insights. I know this has been a busy time for you. We greatly appreciate it. Thank you, Cynthia, thank you, Thanks so much, Cynthia h thanks for listening. Be sure to tune in next week for another episode of Strictly Business.