The pandemic has struck many economic nerves, causing excruciating financial pain. One of those nerves has been small businesses, of which I am attached.
I own a very small marketing company in Houston, Texas, along with my friend, Jarred Trapp. The shutdown of the economy has put a lockdown on some of our clients’ businesses, and therefore has put our business in dire straits.
Thank goodness Congress passed the CARES Act in order to put Americans at ease. The $2.2 trillion bill provides hundreds of billions of dollars to individuals, small businesses, and corporations.
During a White House press conference a month ago, Steven Mnuchin, the Secretary of the Treasury, proposed $1,000 checks to Americans to help with the economic shutdown. It was upped to $1,200.
An Additional Waiting Game for Small Business Owners
All business owners had to do was fill out a loan application, which required from us the U.S. Small Business Administration (SBA) Disaster Business Loan Application, the IRS form 4506-T, and personal financial statements.The EIDL came with a promise of an advance of up to $10,000 per business to “keep employees on payroll, to pay for sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent and mortgage payments.” These EIDL advances were to be provided to businesses “within three business days.” The advance would not have to be repaid “under any circumstance.”
I submitted my application on March 31. For a moment I was set at ease because I, along with many other business owners, was under the impression that this shutdown could go into a month, possibly longer, and $10,000 could cover our business expenses for that period of time. Until then, we would batten down the hatches and get as much work as possible.
But then three days went by. Then five. Then six. I finally called the SBA and waited for 76 minutes to talk to a representative. I fully anticipated a long wait time, and so was not agitated at waiting. The representative was very informative, very understanding, and very calm during the conversation. He informed me that after our business received the $10,000 advance, we could apply for two separate $25,000 loans.
The reason we had not heard back from the SBA was due to the massive amount of applications. Instead of three days, it would be seven, but was assured I would be contacted that week. That was a Monday. The week went by as quietly as the previous. The following week rolled around and 14 days had officially plodded by without a peep from the SBA.
Calling the SBA ... Again
The morning of receiving the email, my business partner called the SBA. There were approximately 2,700 callers ahead of him, but that was no issue. A representative came on the line to provide little, if any assistance. She informed us that our application had yet to be reviewed.We asked why it was taking so long for it to be at least reviewed. She stated that there were 40,000 applications submitted that day alone. How true that was, I cannot tell. But she added that there were applications from two months ago that had not yet been reviewed. That I knew to be false because the program had been in operation less than a month.
We asked when our application would be reviewed, and she said she didn’t know. I asked would it be before or after all the small businesses filed for bankruptcy? She asked if we had any more questions, to which we asked again how we could know when the application would be reviewed. Jarred looked at me and said, “She just hung up on us.”
A Call from Washington
The conversation began much like this article—a rundown of what had thus far transpired. It was confirmed that the EIDL advance had been adjusted due to the amount of applications. When I asked why it was taking so long for applications to be reviewed, the answer was rather alarming: “The amount of applications was more than expected.”Now, this expectation either came from a lack of mathematical curiosity or mere naivete. Since half of the U.S. economy relies on small businesses, the expectation should have been more than the probability. What resulted was less than the promised amount of money along with an extended review-and-receive period—a period of time that will now be, at the very least, six times as long.
The review-and-receive period includes two to three weeks for review, along with up to five days for the money to transfer into a business’s bank account.
The Paycheck Protection Program Loans Fiasco
To call the Paycheck Protection Program (PPP) process a fiasco is not an overreach. These loans are 100 percent federally guaranteed. The loans, however, are processed through the banks.The application process is simple enough, unless you have to ask a question. If a question arises from a customer, bank representatives are helpless to answer. Why? The banks have been provided no information from the government.
Other than what is stated on the bank’s website, which is information provided by the federal government, there is no additional information. The only help available comes from blogs or financial websites that base answers on government-provided information and that of the trials and errors of individuals.
I, however, was one of those small business customers who had a question. The list of tax-related documents required for the application did not include K-1s. As business owners, that’s our IRS form. One option was our 2019 Business Tax Return. That had just been completed. The first attempt to submit the form resulted in an error message suggesting I upload a different document. The message included the fact that I had “three total attempts” to submit my application.
I immediately called my business banker at Chase. He had no information. He reached out to his manager. They had no information. Our tax representatives had no answers either. The recommendation? Send it anyway and hope for the best.
The question of whether the application will be accepted is unknown. The timetable for when the loan will arrive, if accepted, is on par with that of the EIDL advance.
If we do happen to receive the PPP loan, it comes with a maximum of a 4 percent interest rate. Of course, we most likely won’t have to pay it back since the money will go strictly to payroll, but it is odd that the government would provide loans with an interest rate based on a situation they required take place—whether justified or not.
- Government agencies abide by different restrictions than private sector businesses. Since these loans are federal, does that mean that the federal government can dictate how a small business operates in the future, especially in the case of hiring and firing?
- Also, federally funded student loans are not forgivable, even through bankruptcy. Since the maximum loan size is $10 million, will these loans be forgivable? Or will small- to medium-sized businesses be stuck with a massive debt while trying to gather their footing from a recovering economy?
For now, I will continue to watch every dollar, try to obtain more work, keep my fingers crossed that these loans arrive somewhere in the near future, keep contacting my representative, and trust God that all will pan out.
