Business leaders in Nassau and elected officials expressed hope the new COVID-19 rescue package that passed the U.S. Senate this week would help small businesses left out in the cold when funding dried up for the Small Business Administration’s initial loan program.
A number of small businesses in the county failed to obtain loans as larger publicly traded companies around the nation qualified for aid and depleted the SBA’s disaster fund.
The U.S. Senate approved a $484 billion aid package Tuesday that would replenish the Paycheck Protection Program, designed to help small businesses affected by COVID-19, and provide more funding for hospitals and testing. The measure includes $320 billion in loans to small businesses as well as $50 billion for the SBA’s disaster relief fund.
The loan program, part of the $2 trillion stimulus package enacted March 27 and administered through the SBA, is intended to help businesses maintain payroll and retain employees. Loans are forgivable if used to cover payroll, benefits, rent and mortgage.
The initial $359 billion aid package ran out last Thursday, two weeks after its launch. Congressional leaders and the Trump administration were at a stalemate over the next phase of the relief fund before reaching a consensus Tuesday.
Many Democrats argued that the initial aid did not reach the businesses that need it the most, including minority-owned businesses and “smaller” small businesses.
U.S. Sen. Chuck Schumer (D–N.Y.) responded to Republican criticism Sunday that Democrats were holding up the process of passing the next phase of the program, saying his side of the aisle was fighting to include provisions that will ensure that minority communities and rural areas get relief.
“Some businesses did seem to get it, and we’re glad about that, but a lot of our businesses, and certainly myself, are frustrated,” said Richard Kessel, chairman of the Nassau County Industrial Development Agency. “Some of the larger corporations … seemed to get it, and some of the smaller businesses, like dry cleaners, barbershops, restaurants, small law firms didn’t, and I think it’s very unfortunate. I’m just hoping in this next round that’s upcoming that the majority of the money goes to the hardworking small business people, not just in Nassau County, but around the country, who need help.”
U.S. Rep. Thomas Suozzi (D-Glen Cove) said he was worried about small businesses being cut out.
“I am very concerned about the Payroll Protection Program for small business,” Suozzi said in an emailed statement Tuesday. “Not only must more money be placed into the program, but I am hearing too many examples of ‘big’ small businesses getting money, but ‘smaller’ small businesses getting left behind by the banks.”
Mitch Schwartz, president of the Port Washington Chamber of Commerce, told Blank Slate Media Wednesday that only five of its members reported that they were approved for PPP loans. Of the five, one member, a TD Bank customer, has received funding, he said. There are 13 pending applications with JPMorgan Chase, two with Citibank, two with Valley Bank, and one each with Dime Community Bank, Signature Bank, and TD Bank.
Some of the businesses with pending applications were told that they were approved, but that there was no funding left, Schwartz added.
The first-come, first-serve approach, some argued, tipped the scales in favor of businesses with the resources to navigate the application process and those that have previously established relationships with lenders. Some $60 billion of the $484 billion bill approved by the Senate would be designated for community-based lenders, smaller banks and credit unions to assist small businesses that do not have established relationships with big banks.
“I have heard from a number of businesses that they were unable to get through to their bank, and by the time they had heard, the money had dried out,” Kessel said. “And you can’t just blame the banks, because they were overwhelmed by the program. There has to be a better way to administer the program.”
A series of class action suits filed Sunday on behalf of small business owners accuses JPMorgan Chase, Wells Fargo, Bank of America and other large banks of prioritizing borrowers seeking larger loan amounts. This would mean that banks collected larger processing fees and smaller businesses were deprioritized.
Less than 10 percent of the funds allocated so far has gone to food and hospitality businesses, which have been disproportionately hurt by the coronavirus crisis, according to data released by the SBA. Some 12 percent has gone to manufacturers, while 14 percent was given to construction companies.
“Companies looking for $1 million are getting funded, but doctors, dentists, and plumbers with small practices looking for $50,000 or $100,000 are hearing ‘sorry, no more money left,’” said Suozzi. “Too many banks prioritized existing clients with bigger businesses and ignored the little guys.”
Suozzi noted that this rings true of businesses on Long Island’s North Shore.
“I am concerned that the stories I am hearing from just some of the small businesses in my district is actually a pattern,” he said. “That is bad.”
A loophole in the original small business loans legislation allowed large hotel and restaurant chains such as Shake Shack and Ruth’s Chris to apply and receive aid through the program. Congress allowed separate subsidiaries and locations of national and international chains to apply as businesses, following weeks of lobbying by the hospitality industry leading up to the program’s launch.
New York City-based fast food chain Shake Shack, valued at $1.6 billion, received $10 million through PPP. After experiencing intense public backlash, founder Danny Meyer and chief executive Randy Garutti announced in a statement on Sunday that they would return the money.
“I was glad to see that @shakeshack will be returning the #ppploan,” Treasury Secretary Steven Mnuchin wrote on Twitter Monday.
Ruth’s Chris Steak House, which has 150 locations and is valued at $250 million, reported receiving $20 million.
The aid package that the Senate approved Tuesday also includes $75 billion for hospitals overwhelmed with coronavirus patients and $25 billion for a new coronavirus testing program. Democrats in Congress have pushed to allocate more aid to hospitals over the past couple of weeks.
“Congressional Democrats are proud to have secured an agreement on an interim emergency funding package that has been transformed to provide real support for the lives and livelihoods of the American people,” House Speaker Nancy Pelosi (D-Calif.) and Schumer said in a joint statement Tuesday. “Democrats flipped this emergency package from an insufficient Republican plan that left behind hospitals and health and front line workers and did nothing to aid the survival of the most vulnerable small businesses on Main Street.”
Democrats did not, however, manage to secure more funding for cities and states, many of which are under incredible financial strain due to funds going toward preventing the spread of coronavirus and drop-offs in tax revenue. Mnuchin said that this would likely be included in future measures.
Suozzi, among others, also contends that New York did not receive its fair share of funding through the Coronavirus Aid, Relief, and Economic Security Act passed on March 20.
“The state of New York needs special help as we are bearing the brunt of this pandemic,” Suozzi said. “This is affecting us at all levels and we are getting hurt from every angle.”
New York will receive approximately $12,000 per confirmed COVID-19 case, according to a Kaiser Health News analysis. Nebraska, for instance, where 1,287 people have tested positive, will receive more than $379,000 per case.
The bill approved by the Senate Tuesday would need approval from the House and then from President Donald Trump in order to go into effect.
“I urge the Senate and House to pass the Paycheck Protection Program and Health Care Enhancement Act with additional funding for PPP, Hospitals, and Testing,” Trump tweeted Tuesday. “After I sign this bill, we will begin discussions on the next Legislative Initiative with fiscal relief to State/Local Governments for lost revenues from COVID 19, much needed Infrastructure Investments for Bridges, Tunnels, Broadband, Tax Incentives for Restaurants, Entertainment, Sports, and Payroll Tax Cuts to increase Economic Growth.”
“The thing is that most of the money in the next round must go to the small business person,” Kessel said. “And I understand some of the larger corporations [need aid], but they ought to wait at the back of the line. And at the front of the line are hardworking small business people, the local hardware store, the local jeweler, the local restaurant, the local clothing store, they’re the people that ought to come first in the next round.”
“Hopefully, this opening up [of the program] will improve things,” Schwartz said. “It looks like the first round all went to big customers.”
If you already applied for a loan during the first phase of PPP and did not hear back, contact your bank to confirm that they still have your application and that it will be submitted once the loan program begins accepting applications again, Kessel advised.
“I think that is the most important thing that they could do,” he said.
