Amid delays, small businesses desperately wait for PPP loans | Business
Last year, Barbara Thigpen had a difficult choice to make: close her 10-year-old salon, or dip into her son’s college fund.
The salon had been closed for much of the year by the state of California’s mandate due to the pandemic. Then the government said it was offering a third round of paycheck protection program loans. Thigpen thought he had found his solution.
She applied for a PPP loan on February 20 of this year, hoping the money would arrive in time to help keep the lights on in her Jason Rose living room in San Rafael. But his loan application remained in limbo. His son’s college fund is now paying the electricity bill.
“I quickly realized that without the company there would be no way to replace its college fund and that I would just have to work longer and harder,” Thigpen said.
It has been almost a year since the last round of PPP money was made available. For the majority of small businesses, that money has already been spent. The third round opened on January 19 with $ 284 billion in funding available. But these funds are taking longer to reach small business owners due to additional compliance checks and the recent release of new rules governing how small business owners should apply for loans, according to the Small Business Administration.
It wasn’t until last week that the Biden administration announced that the application changes would be coming, and then it took over a week for the SBA to announce the new rules. This has left small business owners, like Thigpen, at a standstill. His bank has suspended processing of his loan pending further guidance, Thigpen said.
To make matters worse, the Biden administration previously announced an exclusive two-week window – between February 24 and March 10 – for businesses with fewer than 20 employees to apply for PPP loans. The move was taken to ensure that the country’s smallest businesses have access to loans after being mostly excluded from the first round of PPP funding. But with the new application requirements dropping this week, banks and lenders are only digesting the new requirements and having to ask many business owners to reapply and re-apply.
“What I can’t really understand is that the government would set new rules and wouldn’t understand that this two week window and these new rules would cause a conflict. This isn’t the first time they’ve deployed this program and watch it crumble, ”Thigpen said.
Hundreds of thousands of pending requests
The SBA has recognized that loans take longer to process due to additional compliance checks. If no issues are raised with the applications, the agency said the approval time should be less than 48 hours. By law, the lender then has 10 days to finance the small business.
Still, hundreds of thousands of small businesses may not be approved by the SBA’s March 31 deadline for the loan program, according to members of the small business community.
So far, in this latest round of PPP, the SBA has processed 2.2 million loans from 5,100 lenders, for a total of $ 156 billion. In the first round, 1.6 million loans totaling $ 342 million were processed within days. At the time, business loans were approved up to a maximum of $ 10 million. In this round, loans cannot exceed $ 2 million.
In a letter to Senate and House leaders on Monday, 65 chambers of commerce, lenders, small business owners and national trade organizations are calling for the PPP deadline to be extended until at least June 30.
“There just isn’t enough time over the next month for the SBA and approximately 5,000 lenders to convert rule changes into technical, content, support, and compliance updates, and then new applicants are processed, approved and funded, ”the letter said.
The United States Chamber of Commerce has asked Congress to extend the deadline until the end of the year.
Lendio, an online marketplace for small business loans, processed $ 8 billion in PPP loans to 115,000 small businesses last year. But it’s moving three times slower this time around, despite hiring an additional 1,000 people, the company’s CEO told CNN.
“It’s so complex by a factor of maybe ten times that. Fifty percent of cases submitted to the SBA fail,” said Brock Blake, CEO of Lendio.
Most errors are fixable, Blake said, but the company must contact each candidate individually to correct and resubmit the application, delaying critical funding for tens of thousands of small businesses.
This is what happened with Diane Bondareff.
When she applied for her second PPP loan with Lendio on January 28, Bondareff was forced to upload additional documents due to tighter fraud checks by the SBA. The delay cost her a month, and she is still waiting for the money.
Bondareff runs a personal photography business in New York City. Her business is down 88%, which is why her request for a $ 10,000 PPP loan would make the difference between having to pack or stay.
“I wake up at three in the morning and wonder how long I can stay any longer, when business returns. If I can access funds, I could stay here and hang on and hope things come back. to a certain type of business, ”Bondareff said.
“It’s probably too late”
Fortuna Sung and Matthew Garrison opened the ShapeShifter Lab jazz club 10 years ago in Brooklyn, New York. As a small, independent music hall, they have been closed throughout the pandemic. They are not eligible for a PPP loan because their staff are subcontractors.
But the Shuttered Venue Operator Grant, designed specifically for smaller venues, was passed in the December stimulus bill. The grant covers the equivalent of 45% of a site’s gross income in 2019 – a significant increase in funding for a PPP loan. However, the SBA has yet to open applications. And business partners say they can’t afford to stay in their space after the month is up.
“Unfortunately for some sites, especially ours, it’s probably too late,” Garrison said.
The SBA says it is “building this program from the ground up and working fast to ensure… that these vital grants are provided to those whom the law intends to help.”
But if the SBA doesn’t open the grant program next month, companies like ShapeShifter Lab will be forced to shut down. Hundreds of small independent theaters have already closed due to a lack of funding, according to the National Independent Venue Association.
“I would be very upset because it’s basically our lifetime savings that we put into it and it all evaporated,” Sung said.
– Kate Trafecante contributed to this report.