What Botched Rollout Of SBA’s Paycheck Protection Program Means For Black Business Owners
Right now small business owners have 99 problems – and the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) is one of them. While intended to help small businesses and their employees survive the COVID-19 coronavirus pandemic, PPP’s challenging rollout has left many entrepreneurs discouraged. The problem is exacerbated for Black small business owners.
“I feel like the application is a black hole and they’re going to apply all these criteria that we can’t meet as Black business owners,” Vania Bredy said in an interview with Moguldom. Bredy owns Bredy Physical Therapy & Sports Rehabilitation clinic in South Florida with her husband, Yonel Bredy.
Bredy said they’ve been trying to apply for PPP since the first day the program opened. She added she’s contacted her bank multiple times, but Wells Fargo has yet to grant her an application.
According to Bredy, Wells Fargo only sends an automated reply stating she’s in the queue of applicants and they are working as quickly as they can to get back to her.
The notice even encouraged her to apply elsewhere, said Bredy, who’s been a Wells Fargo customer since her business opened in 2016. Due to COVID-19, Bredy said she and her husband recently had to layoff one of their employees.
“I was excited about it at first, but as time went on, I just feel like it’s just a hoax and it’s going to be difficult for us,” Bredy told Moguldom. “I don’t know anyone who’s gotten any funds in their account and I know at least 10 different healthcare providers that tried to apply.”
Bredy’s experience is echoed by Dominique Jones, who owns Jam Box Fitness in Dallas, Texas. Dominique Jones said she has applied for PPP with two different banks where she has business accounts – Regions Bank and Wood Forest National Bank.
“I have applied through both and I have not heard anything from either and also no one at the bank really knows anything. They just know the top 10 high points and everything else is ‘call SBA, call SBA, call SBA,’” Jones told Moguldom.
With 18 employees across three locations, Jones said she isn’t holding her breath about receiving funding.
“I definitely have fears that I’ll never see the money. I don’t have a lot of stock in getting funding to be honest, just because the numbers are so staggering and nobody knows anything,” Jones said.
SBA relief in theory vs. practice
Designed to provide relief for startups and small businesses, PPP allocated $349 billion to offer small businesses low-interest, forgivable loans of up to $10 million, with some restrictions. The program does not require a personal guarantee from business owners and the loans are supposed to be available through June 30, according to the SBA’s PPP webpage.
Before the program launched, the SBA said the loans would be processed differently and available for approved applicants the same day.
That didn’t happen.
Instead, banks’ systems crashed; some only allowed existing customers to apply and some haven’t even begun offering the program. Due to such high demand, U.S. Treasury Secretary Steven Mnuchin requested an additional $250 billion for the program.
A bank president’s perspective
Teri Williams, president of OneUnited Bank (the nation’s largest Black-owned bank), said banks are still on a learning curve since PPP is also new for them.
“To be honest we’re still trying to get a better understanding of the program ourselves,” Williams told Moguldom. “It does seem like a fabulous program as we look into it, particularly for our community. … Banks do have to go through a process to offer the program and even once you’re qualified to offer it, it’s a very different process from how SBA loans have operated in the past.”
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“At this moment we’re not concerned about them running out of funds, because they do seem to express a willingness to add additional funds if needed,” Williams said. “There are a lot of new programs that have come about and, as a banking institution, we’re trying to figure out all of these programs, not just the PP program.”
Williams also penned five tips to help business and non-business owners alike financially survive COVID-19, stating their main priority is to make sure the Black community has the resources it needs during this trying time.
“We’re trying to figure out the best way to execute all of the programs for our community and make sure the programs are accessible and done correctly,” Williams said.
Other SBA financial relief programs
In addition to the PPP, the SBA is offering business owners other COVID-19 relief programs including the Economic Injury Disaster Loan (EIDL) Emergency Advance, SBA Express Bridge Loans and SBA Debt Relief.
Like the PPP program, the Economic Injury Disaster Loan Emergency Advance is available to small business owners, sole proprietorships, independent contractors and self-employed persons. It offers a $10,000 loan advance while applicants wait to see if they are approved for a larger EIDL loan.
Express Bridge Loans of up to $25,000 can be applied for by businesses with existing relationships with SBA Express Lenders and the Debt Relief program offers payment deferments through December 2020.
A Black lawyer’s perspective
Joshua Jones (no relation to Dominique Jones) is an attorney based in South Miami-Dade County and owner of Josh Jones Law P.A. He said he studied PPP for weeks before it rolled out. He agrees with Williams’ statements regarding banks trying to get a handle on the various relief programs created by the CARES Act.
“The biggest issue is that most banks are unfamiliar with how to do this because a lot of banks don’t ever write SBA loans,” Joshua said in an interview with Moguldom. “The other issue is that the SBA is not prepared. Every day you’re getting different information, regulations are changed, the rules are changed here and there, and that makes it difficult.”
Joshua added that many Black businesses may be affected because they work with independent contractors as opposed to having W-2 employees. This may impact the amount of money they can apply for since independent contractors can apply for the program themselves as of April 10, he said.
He advised business owners to apply at other banks besides their own if there is a delay and to make sure they submit correct paperwork to avoid problems if approved for a loan.
“Make sure the information you provide is accurate because the banks are not responsible for what you report, you are,” Joshua said. “You have to certify that the information you’re giving about your payroll is true and correct because if you get too much money, you may get stuck with an unforgivable loan.”
Like Williams, Joshua said he isn’t worried about a lack of funding. He said he plans to apply for the PPP, however, he is waiting to vet the best institution to do so with.
“I believe that there’s going to be enough money. I just want to wait and see which banks are doing what so I can see who I want to be attached to,” Joshua said. “On the back end of this, you’re going to have to work with the same bank on the forgiveness process and all banks are not going to be as dedicated. Some big banks are not going to dedicate the resources to the forgiveness aspect because they’re going to have already gotten what they wanted out of it, which is making the loan. I just want to make sure I’m partnered with who I think is going to be the best bank to help see the process through.”
Black business owners remain skeptical about Paycheck Protection Program
Despite Joshua and Williams’ optimism, Bredy and Dominique Jones still aren’t sure the federal government’s relief options will help them.
“They’re going to give these loans to the businesses they typically give these loans to. It is not for mom and pop businesses at all,” said Bredy, who also applied for the Economic Injury Disaster Loan and said she has yet to hear anything back.
“I just don’t know what the future holds. I can’t tell you that my business is going to be open in a month and that’s going to hurt. My biggest thing is what is being done to ensure when this is all over we can return to business and continue to help our community the way we do,” Bredy said.
Dominique Jones agreed with Bredy once again.
“I’m not even concerned about them giving more money because they can be giving $17 trillion dollars, but if I don’t know anyone who’s getting it and the process is ridiculous like this, it doesn’t matter how much it is. If you can’t access it, it just sounds good for TV,” Dominique Jones said. “I have resorted to applying for grants and I have put more faith in that than I’ve put into these forgivable loans the government’s giving.”
She concluded that she found it “mind-blowing” that the Trump Administration was touting the success of PPP.
“He didn’t just lie, he lied on steroids and inflated it to the 29th degree,” Dominique Jones said. “When you use words like the PPP is ‘flawless’ and say it’s better than they ever expected … he’s using terminology that’s not just contradictory, it’s like an insult. You start to wonder if you’re crazy. I was like, ‘I’ve got to be crazy because we can’t possibly be talking about the same thing.’ I was like, ‘Am I in a twilight zone here?’”