“It’s not a huge amount of money, but it is the difference between staying open and not being able to stay open,” Carlin said.
President Trump signed a measure Friday pouring an additional $310 billion into the program as part of a larger $484 billion coronavirus spending bill. The Small Business Administration said it would begin accepting applications again at 10:30 a.m. Monday, setting off a frenzy among lenders and small businesses to scoop up the funds.
The original program was marred by numerous glitches among lenders, many of which were not ready to accept applications when the program launched, and repeated reports that the Small Business Administration’s computer systems were struggling under the deluge.
This time, lenders say they have thousands of applications ready, and some have developed new technology to make it easier to load loan applications into the SBA’s computer systems, in hopes of gaining an advantage. JPMorgan Chase and Bank of America, two of the country’s largest banks, said they have tens of thousands of applications prepared.
Some bank executives say they are preparing for the money to run out within 48 hours and are planning to stay up all night once the SBA begins taking applications again.
“My biggest concern is SBA not being able to handle the amount of loans trying to be processed and American small businesses becoming frustrated even more than they are today,” said Richard Hunt, president of the Consumer Bankers Association.
The Paycheck Protection Program was touted as a lifeline to the United States’ 30 million small-business owners, offering loans of up to $10 million that would be forgiven if the companies used most of the money to retain employees. But nearly 80 percent of the small businesses that applied for a loan were still waiting for an answer as of April 17, the day after the program ran out of money, and many did not know where they stood in the application process, according to the National Federation of Independent Business.
Randy Tellez, co-owner of an executive car service in Los Angeles, was so sure Wells Fargo would quickly approve his $100,000 loan application that he paid the salaries of his eight drivers through the middle of this month, even though they were no longer working. By then, customers had already started canceling rides through May, but Tellez said he was confident the company was an ideal applicant, since it had been directly affected by the economic upheaval.
But Wells Fargo left him in a holding pattern, Tellez said, and by the time he was able to apply, the fund was out of money. “Wells Fargo didn’t allow us to apply before it was too late,” he said. “They really let us down.”
His application is still pending, and Tellez is pinning the company’s future on securing a loan this time around. Without it, he can’t continue to pay employees. Tellez said he’s not hopeful: “I keep getting let down.”
Wells Fargo has said that it is working as quickly as possible on customers’ loan applications and has mobilized thousands of employees to work on the program. The bank initially cut off applications just days after the program launched, saying it was limited by a cap on its growth imposed by federal regulators. The Federal Reserve temporarily relaxed the cap, and Wells Fargo began taking applications again.
Kathleen Foley-Hughes opened Ada’s Cafe in Palo Alto, Calif., more than five years ago as a training ground for adults with disabilities. As news of the coronavirus spread, she became concerned that employees, many with underlying medical conditions, could be vulnerable. “I was terrified, constantly cleaning,” she said. “I just kept thinking one of my employees could end up in the hospital and no one would be there with them.”
Foley-Hughes closed the nonprofit cafe on March 9, about a week before California issued its stay-at-home order. Since then, Ada’s Cafe has continued to pay some of its 40 employees, but Foley-Hughes says she can’t afford to hold on much longer.
When the Paycheck Protection Program was announced, she immediately contacted her bank, Wells Fargo, but wasn’t sent an application until it was too late. She filled out the form on April 16 and was notified by the bank hours later that the fund was out of money.
“For about an hour I was pretty hopeful, then my hopes were quickly dashed,” Foley-Hughes said.
Now, Foley-Hughes is back in a holding pattern with only two weeks before she will be out of money and unable to pay employees, rent or other bills. Wells Fargo has not said where her application stands in the queue, but Foley-Hughes is holding on to hope. She has bought face masks from Etsy in preparation for reopening and begun to sketch out plans for running the 600-square-foot cafe while keeping proper physical distance between employees and customers.
“Having a negative mind-set doesn’t help you, doesn’t move anything forward,” she said.
In interviews over the past week, nearly a dozen small-business owners tied the fates of their companies to securing one of the government loans. Many say they are frustrated that banks appear to be giving preferential treatment to their larger customers, while leaving mom-and-pop business owners in the dark.
For Carlin, who owns the North Carolina clothing store, there isn’t much time left. She estimates she has until the end of the month before it will be too late to recover. The hardest part is “not knowing what the next step is, not knowing if I am going to need to sell off inventory and close,” she said. “Without any kind of support or loan, it will be virtually impossible for me to get out of this.”
Congress has earmarked $60 billion of the $310 billion infusion into the program for small banks with no more than $50 billion in assets, in hopes that more of the money will reach mom-and-pop businesses and companies in rural areas. But that does not guarantee everyone will be able to secure a loan, industry officials say.
“It could be a burn rate of $30 [billion], $40 billion a day with all of the loans already in the pipeline,” said Paul Merski, an executive vice president at Independent Community Bankers of America.
“Everyone has applications in hand that are ready to go into the pipeline,” he said. “If it took two weeks last time to go through the entire $349 billion, I would be certain that it would take less than two weeks to get through the system this time.”
Citizens Bank of Edmond, a small community bank in the suburbs of Oklahoma City, is preparing for a mad rush. The bank secured about $15 million in loans for 240 customers with the first pool of funding. But that left out dozens of companies that had applied.
The more than 100-year-old bank has a plan for getting more loans through this time, said its president, Jill Castilla. Instead of submitting loan information to the SBA’s computer system manually this time, the bank has figured out how to automate the process, she said.
“Our expectation is that this money isn’t going to be around for more than 48 hours,” Castilla said. “We’re prepared to do whatever we have to.”
Liberty SBF missed the window to submit customers’ applications the first time. As a non-bank lender, it had to wait several days after the program launched to gain access to the fund, said Liberty’s CEO, Alex Cohen. But by the time it was ready, the money had run out, he said.
Liberty is prepared for the second round, Cohen said, with more than 6,000 applications for $700 million in loans. The lender will submit as many applications to the SBA as quickly as possible, but it also plans to it send some applications to bigger banks if they get overwhelmed, he said. “If there is a finite amount of money, you’re not going to satisfy every person,” he said.
Meanwhile, small-business owners like Sam Donald, owner of Cranberry Island Boat Yard near Bar Harbor, Maine, remain in limbo. The company relies on maintaining the boats of the tiny island’s summer residents and their neighbors. But some customers have already started to cancel and don’t plan to make the trek this year.
“Anytime there is an economic downturn, we get hit really hard in an our industry,” Donald said.
Donald submitted an application for a $30,000 loan on April 9, days after the program launched. The money would help sustain the company and its four employees through a tough summer vacation season, he said. But the bank, Bar Harbor Bank and Trust, didn’t submit his application in time, Donald said he was told. The company is back in the queue for the next round of funding.
“The worst part about it is the uncertainty, and not knowing whether I should tell my crew they will have a job or they should all go get their fishing licenses or something,” he said. “If the summer goes badly for us, I could be in real trouble without this loan.”
An earlier version of this report incorrectly referred to Carlin's store, the Grapevine, as the Great Vine and Foley-Hughes's Ada’s Cafe as Aba's.