Small business owners scramble for answers as loan fund empties

Posted at 7:28 PM, Apr 20, 2020
and last updated 2020-04-21 11:46:54-04

RICHMOND, Va. -- The Paycheck Protection Program (PPP), a cornerstone piece of the federal coronavirus response that provides small businesses with loans to make payroll, ran out of money last week after only a few weeks.

It is estimated more than 20,000 Virginia businesses still have pending applications.

Emilia Sparatta, who co-owns Heritage in the Fan and helps manage Southbound in Bon Air, said her PPP loan applications fit that bill.

“These exercises in futility are really good for my self-esteem and confidence as a business owner,” she said sarcastically. “We had all our paperwork ready to go and submitted our applications on the very first day they were accepting them, and we’re still processing.”

Heritage closed its doors in March and Southbound has been working on a limited carry-out only menu for weeks now. The majority of their staff at both restaurants have been furloughed for now, Sparatta said.

“It’s like you can’t fully breathe. You can’t inhale fully because we don’t know what’s waiting around the corner,” she said. “Every day, do you have any answers? What are you thinking? When are we reopening? What’s the plan? We don’t have those answers.”

Tens of thousands of Virginia small businesses were able to get the first round of loans. According the Virginia Bankers Association (VBA), 40,371 applications totaling more than $8.7 billion were approved as of April 16, the last day funding was still available.

Bruce Whitehurst, President and CEO of the VBA called the roll out of the program “amazing,” despite the rush by businesses and banks to figure out the process and the ensuing hiccups.

The Small Business Administration (SBA), which administers the PPP, processed $26 billion in loans with only 1,700 certified lenders in all of calendar year 2019, Whitehurst said.

“A lot of people refer to this as building an airplane as it’s taking off from the runway, and it did feel that way,” he said. “In two weeks, they did about 12 times that volume and tripled the number of SBA approved lenders to nearly 5,000. Imagine the technology demands and pressures to connect on both sides. Both the SBA to have systems to handle historically high capacity and for bankers to have the ability to connect with SBA.”

The number of businesses with loans still processing does remain sizeable. According to the VBA, 22,726 small business applications totaling requests for $3.235 billion were still pending in Virginia, and the VBA said those numbers are likely conservative.

Whiteshurst said no one should question anxious business owners hurt by the coronavirus response, the pause in processing may give banks and businesses a chance to catch up on applications.

“There are already long lines, but there’s going to be capacity,” Whitehurst said. “The best advice I can offer for small business owners is if you think you may qualify and you’re interested in a PPP loan, if you’re not already taking with your banker make that today’s priority.”

“More likely than not, we’re going to be opening our economy incrementally instead of all at once. Then what that means for the needs that small businesses have to be able to operate, they have to evolve with that,” he continued.

The National Federation of Independent Businesses released results from a national survey of their members that found 80 percent of small businesses approved for PPP loans are still awaiting payment.

Nicole Riley, Virginia State Director for NFIB, called the program roll out in Virginia a “mixed bag,” with mostly well established businesses gaining approval and those with fewer employees encountering difficulties. Riley said their members with long-term relationship with their banking partner reported greater success when applying.

While Congress and the White House barter over a second round of funding for the PPP, Riley said her organization hopes some of the funding is carved out for small businesses who employ only a couple dozen people. She also suggested businesses that have not started compiling their paperwork to do so now.

Since most banks are processing the loan applications, Riley said small businesses owners should try to shop around.

Sparatta said she knows banks are trying to figure out the program on the fly too. She continues to check in daily about the progress of her application.

“For me it’s very much like the old school dial up modem, just dialing, dialing, loading, maybe, waiting, just waiting,” she said. “Even when we get this loan, there are eight weeks to use these funds. Are we going to be able to open after eight weeks. How long are we supposed to plan on this money lasting?”

Waiting means more than frustration for Sparatta and her furloughed employees.

“It feels just kind of empty. You know we miss seeing the people that have been in our lives,” she said. “We need a plan, and it’s not something we can come up with by ourselves.”

Resources to learn more about the PPP and other small business relief opportunities: