Small businesses struggle to stay afloat amid the novel coronavirus

WASHINGTON — As small businesses suffer from mandatory closures and other measures required by state and local governments during the coronavirus crisis, they are experiencing delays in promised government aid included in a $2 trillion relief package passed by Congress and the Trump administration last month.

The $349 billion Paycheck Protection Program – a significant part of the stimulus package, was launched in early March to support small businesses and is conducted by the Small Business Administration. It is intended to provide loans to employers of small companies hiring fewer than 500 staff as long as they keep all employees on the payroll for at least eight weeks. The program insulates employers from bankruptcy and also protects workers.

Collateral-free loans are forgiven if used for payroll costs, interest on mortgages, rent, and utilities. Loan payments when required are not due for six months. 

According to COVID Loan tracker (https://www.covidloantracker.com/), a privately run site that monitors payments from the protection program, more than one million loans were approved as of this week for $247.5 billion, but only about five percent of the loans have been paid. Meanwhile, Treasury Secretary Steven Mnuchin asked Congress for an additional $250 billion to replenish the program. Republicans and Democrats are negotiating details of the request.

The National Federation of Independent Business, a prominent small business advocacy organization, reported that nearly two in three small business owners successfully submitted applications for PPP loans, but that most small businesses are being shut out of the Paycheck Protection Program forgivable loan program.

Restaurants are among the hardest hit small industries across the country. Interviews with several restaurant owners in Washington, D.C. showed problems. “The most vulnerable businesses have to compete for the same loans with larger companies,” said Eric Shin, who owns Seoul Spice and operates three restaurants in Washington and Maryland. He said he applied for the PPP loans but that funding was no longer available.

“The funding isn’t categorized for different industries,” Shin said, “It’s just one pot of money. The urgency is receiving the funding before runs out.” He also saw delays on which banks were authorized to provide loans under the federal program. Even when banks can provide loans, they may impose restrictions on loan requests when lenders are not existing customers. “Each bank has different processes and different sets of requirements,” Chin said.

Lydia Chang, director of development and operations for the Peter Chang restaurant group in the Washington, DC, metro area, said her business had not received a loan they applied for two weeks ago. The only communication was an email saying that said her application is under reviewed without further information.

“We only make 20% to 30% of the revenue we used to make,” Chang said. The remaining income is generated from delivery orders at more than 10 locations opened by her father, Peter Chang, a prominent local chef. Lydia Chang said she and her father were concerned about long term loss of customers and cash flow issues, while maintaining support for staff and their families. She said the employees, mostly Chinese, remain on the payroll. One complicating factor for Peter Chang and other Chinese restaurants, she said, was that stigma about the coronavirus origin in China brought a turndown in business earlier in the year than for other businesses.

Officials at the National Federation of Independent Business said that small business owners need a quick response to their loan requests. Many, said Brad Close, president of the National Federation of Independent Business, cannot last more than one to two months under current conditions. “Every day without access to the PPPL program means more lost jobs and more shuttered businesses,” he said.

Similar restaurant problems were evident in Chicago. Jaime Gamez, who runs a pizzeria named Big G’s with his partner Jeronimo Gaytan. Gamez said he so far has not been able to obtain approval for a loan, based on confusing criteria for a small business held by two owners.  “We are still waiting for the loans that are available for us,” Gamez said. He said he had lost as much as half of his revenue and had to raise community donation to stay afloat. He said he is using his existing funding to donate pizzas to support the staff at local hospitals.

“My restaurant has donated approximately 450 pizzas to almost 30 hospitals with 250 donators’ support in the past three weeks,” Gamez said.