Small businesses waiting for aid.
A month later, getting a Paycheck Protection loan is a challenge
On the morning of April 3, after racing to build an online platform, the bank BBVA USA began accepting applications for the emergency small business loan program known as Paycheck Protection. Everything went smoothly — for four hours.
That’s all the time it took for the avalanche of applications to exceed the number the bank estimated it could process before the funding ran out. BBVA temporarily paused the portal as thousands of small businesses tried to tap into the federal relief program.
“We had reached our limit,” said Elizabeth Dobers, who oversaw the team of more than 100 engineers, developers and other employees who built the online platform in three days.
BBVA’s experience in the first round of funding for the Paycheck Protection Program not only provides insight into the huge need created by the economic crash caused by the coronavirus pandemic, but also the difficulty the federal government has had getting money into the hands of people who desperately need it.
More than a month after the Paycheck Protection Program began accepting applications, and more than two weeks after Congress replenished the program’s funding, many Houston-area businesses are still waiting for aid. Forty percent of Houston-area businesses who have applied for loans have yet to receive them, according to a survey conducted by the Greater Houston Partnership, a business-financed economic development group, the last week of April. That has left small businesses that have not reopened facing difficult day-to-day decisions.
Anna Elmore, who pledged to keep her spa’s small staff of five on the payroll throughout the shutdown — it lasts for spas until May 18 — had hoped she would receive a Paycheck
Protection Program loan in time to make her rent and payroll by April 15. Instead, she put Light & Tight Medispa’s expenses on her credit card.
“Because I know that that money is coming,” she said, “I’m just going to bite the bullet.”
But on April 20, she received an email from Bank of America saying that her application could not be submitted to the federal government until it approved more funding. (Congress did about a week later.)
“I’m very disheartened and disgusted,” she said.
“I’ve gotten a mortgage quicker than this.”
Congress has authorized $649 billion for the program, which provides low-interest loans to small business and forgives the loans if most of the money is used to keep employees on the payrolls. The demand for loans depleted the program’s initial $349 billion by April 16, leaving small businesses in limbo for 11 days until Congress appropriated another $310 billion .
Money has not been the only problem. Unclear rules created confusion about who
qualified for the funds and glitches in the federal electronic system accepting applications slowed down the process.
At BBVA USA, Dobers had no illusion about how tough it would be to connect small businesses with Paycheck Protection Program funding as quickly as possible. Typically, it takes the bank months to develop and roll out online applications, not days.
Problems cropped up even after BBVA’s portal was up and running. The bank was having difficulty getting people to upload documents, at first because its document upload button did not work and then because customers were bypassing the step in their hurry to finish their application .
BBVA rushed to remove the bug and add prompts reminding clients that their application could not be processed without the proper paperwork.
The Small Business Administration, which oversees the federal program, had its own problems stemming from the fastand-furious roll out. Many details regarding eligibility — whether independent contractors qualified, for example, or how to count seasonal employees — were not cleared up until after applications opened.
“We didn’t get clear direction from the SBA until the night before,” Dobers recalled. “Even after we launched, guidance was changing.”
So far, more than half a dozen updates to the Paycheck Protection Program rules have been released, with the most recent rule — exempting students employed by federal work-study programs from company headcounts — coming out May 8.
Frustrating delays
Then, when Congress released the additional money for the second round of funding, the Small Business Administration’s electronic system was slow to accept applications, often flashing error messages or timing out.
“This has left us with applications in hand and no way to process them to put much-needed money in the hands of millions of small businesses in need,” Dobers wrote in an email on April 27, the first day the new funding was made available.
While many small businesses have encountered a frustrating series of delays, several highprofile companies have drawn fire for successfully securing Paycheck Protection Program funds. While the program roughly defined small businesses as companies with 500 or fewer employees, Congress carved out exceptions, including for restaurant chains and other franchise businesses.
For example, Luby’s, which employs 6,133 full-time employees, according to public filings, received a $10 million loan. It was able to qualify as a small business because none of its locations employ more than 500 people .
Luby’s did not respond to requests for comment.
But Mala Sichuan Bistro, a restaurant that saw sales plunge by a third, was originally denied from the program because of confusion surrounding whether employees with green cards could be covered. (All employees can be covered if their principal place of residence is the United States.)
It has since reapplied, but the holdup meant the restaurant did not receive funding during most critical period when government orders required it to close its dining rooms.
Its owners, Cori Xiong and Heng Chen, remained hopeful that funding will come through. Even though dining rooms have reopened, fewer diners will be allowed at any given time, meaning reduced revenues for the foreseeable future.
Round two
But BBVA reports it has received even more applications for the second round of Paycheck Protection Program funding than it did for the first. So far it has shepherded $2.2 billion in loans through the application process. Roughly $121 billion was left in the fund as of May 8, according to the SBA.
That suggests more of the funds are going to smaller companies, which need less money than big chains. In the first round, during the first 10 days, the average loan was $239,000, with 57 percent of money going to loans of $1 million or more.
Since the funding was replenished, loans have averaged $73,000, with 31 percent of the money doled out in loans of $1 million or more.
“The funding has lasted longer than we initially anticipated,” Dobers wrote in an email, “but with latest reports putting the funds at over half depleted, we expect the second round of funding to be wrapped up within a few weeks.”
“I’m very disheartened and disgusted. I’ve gotten a mortgage quicker than this.”
Anna Elmore, owner of Light & Tight Medispa