Frustrated Business Owners Struggle to Access Rescue Dollars

(Bloomberg Businessweek) -- Almost one-quarter of small businesses have temporarily closed, and 1 in 10 are less than one month away from failing, warns a poll released on April 3 by the U.S. Chamber of Commerce. There’s enormous demand for funding and the situation for business owners is really difficult, says Molly Brogan Day, vice president of public affairs for the advocacy group National Small Business Association. “Small businesses needed money weeks ago.”

It’s no surprise, then, if you’re encountering problems in applying for—and getting—small business relief from the federal government. The two main programs established to extend lifelines to America’s 30 million small businesses have been dogged with problems.

PPP (or Pretty, Pretty Please)

The Paycheck Protection Program (PPP), a new Small Business Administration (SBA) initiative, got off to a rocky start when it launched on April 3. The aim is to encourage small businesses to retain or rehire their employees by taking low-interest loans of up to $10 million that can be forgiven. The process requires borrowers to find a lender that participates in the program, apply, then wait to hear from their lender if the application is approved.

There are quirks to the program. Because it’s new, the kinks are still being worked out—in real time.

1. Not all lenders participate. Those that do have been getting conflicting guidance from the federal government. That has made it hard for lenders to know what to include in the application. Some new, non-bank lenders have been approved to participate, including PayPal, Square, and Intuit, TechCrunch reported.

2. If you don’t have an existing relationship with a participating lender, you may be at a disadvantage, says Brogan Day. Some lenders were only accepting applications from existing customers when the program launched. She worries rural areas will get hit hard.

3. The program started accepting applications from the self-employed and independent contractors on April 10, adding to the crush of paperwork lenders must process.

4. Even if your application is approved, the terms are still opaque, says Cynthia Ward Wikstrom, campaigns director at the advocacy group Main Street Alliance. “It’s very unclear, still, how many businesses can usefully use this money and still meet the criteria to be able to have it convert to a grant,” she says. Owners have big questions about whether it makes sense to saddle themselves with debt if the loan won’t be forgiven, she says.

5. Adding to concerns: The PPP program could run out of money within days, Bloomberg News reported, noting that more than 959,000 applications totaling over $232 billion had been approved as of the evening of April 13.

EIDL  (or Idle?)

The Covid-19 Economic Injury Disaster Loan (EIDL) program, a new version of a decades-old Small Business Administration program that provides low-interest loans of up to $2 million to small employers after natural disasters, is drawing criticism from applicants for failing to communicate about the status of their applications and for delivering less money than requested.

The experience is frustrating because:

1. First, there’s a new addition to the program, essentially a grant of up to $10,000 that was supposed to be disbursed to business owners in three days. “Now they’re hearing six to seven days,” says Ward Wikstrom.

2. Many owners assumed that up to $10,000 meant they would get the full $10,000. They are now being told they’ll get $1,000 per employee, she says. “For a small business with three employees, that’s nothing.”

3. Some business owners who applied for EIDL are being told that the SBA is limiting the amounts of initial disbursements. A customer service representative at the agency told one of the businesses we interviewed that for now it can only offer initial loans to cover two months’ worth of working capital, up to a maximum of $15,000 per applicant. The business owner we talked to couldn’t get clear answers about when, or if, she would get information about the rest of the loan she wants.

The SBA did not respond to a request for comment.

What should frustrated would-be borrowers do?

1. Hang in there.
   In an April 8 post about the PPP, Todd McCracken, NSBA president and chief executive officer, urged small businesses to be patient and persistent. “The loans—which in most cases amount to grants—can be a major help for small businesses now when they need it most,” he said. “The unfortunate reality of getting a massive funding program off the ground is that there may be hiccups, but these hiccups need to be resolved quickly.”
2. Be prepared.
   Review the guidelines at the PPP web page and the Covid-19 EIDL page. Speak to an accountant, a banker, and an adviser at the nonprofit SCORE  or your local Small Business Development Center to learn what to expect.
3. Research other sources of funding.
   Some states, cities, and companies are offering relief to businesses that could help fill gaps until federal assistance arrives. We compiled a selection.
4. Compare notes with other business owners.
   To get a sense of what it’s like for small businesses in different industries that are trying to use both programs, we’re asking owners across the country to share their experiences with us. We’ll publish the first of their stories and update here once those are live.

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