Business owners have waited years for Covid loans – and now it’s too late

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Jaja Chen and her husband Devin Li were thrilled when they signed a lease for their new bubble tea shop, Cha Community. Both Asian American immigrants (she from Taiwan, he from China), they said it was hard to find authentic Asian food in their new home in Waco, Texas. So they finally decided to host a pop-up at a farmer’s market. Later, they moved on to a food truck. Finally, they opened a real showcase where they could serve customers tea and dumplings.

Chen signed the lease and flew the next day to visit his family in Taiwan. There, she started hearing “Covid ideas”. A few months later, as the couple back in Waco prepared for their grand opening, pandemic shutdowns hit. The Cha community remained closed for another two months. In total, they lost around $20,000 upfront.

At the time, Chen decided to apply for emergency assistance through a host of new programs offered by the US Small Business Administration. The couple applied for both a 3.75% fixed interest loan under the Economic Disaster Loan Program as well as an advance grant of $10,000, getting their application a day before it opened to the public on March 20, 2020.

After two weeks, they registered with the SBA and were notified that the advance grant was coming, Chen said. Chen said they were also approved for a $20,000 loan, but turned it down because the grant was supposed to be on the way. But more than two years later, the grant has still not arrived. “As of today, we have no idea what happened,” Chen said.

She is one of hundreds of small business owners who say they have been waiting almost two years for help from the SBA. In a new survey released Thursday by the Small Business Majority, a national network of small businesses and community organizations, about a third of the 201 small business owners surveyed who applied for an EID loan said they had never received no response, no money, from the SBA.

And now, the SBA says funding for the program is likely to run out in the coming days.

As part of the federal government’s initial response to Covid-19 and the sudden shutdown of the US economy during the first lockdown, the SBA was tasked with rolling out relief for businesses of all sizes. The EIDL program actually predates the pandemic, albeit on a much smaller scale (it disbursed $3.6 billion in disaster loans in 2018, compared to more than $369 billion in recent years). years).

The agency quickly ran into trouble, said Brian Pifer, vice president of programs and research at Small Business Majority. The pandemic has necessitated “a huge scale-up of the agency nationwide,” he said. The agency had “a capacity and staffing problem”, so small businesses “sort of fell through the cracks”.

In a statement, the SBA did not respond to complaints from small business owners who say they have never received a decision on loan or grant applications. The agency said it had increased processing capacity for pandemic-related EIDL loans and accelerated the pace at which decisions on applications were made. The agency also said a backlog of more than 600,000 requests for loan increases had been cleared.

During the pandemic, the SBA also raised the cap on EID loans, allowing businesses to apply for an increase of up to $500,000. But among respondents to the Small Business Majority survey, nearly a third of those who asked for a raise said they hadn’t heard anything yet. And of that group, almost a third said they waited more than a year.

“Although congressional appropriations for the Covid EIDL program will soon be exhausted, the SBA will continue to help our small business owners through this difficult transition using our existing resources,” the agency said. The agency said potential borrowers in the process of completing applications have until May 16 to complete any documentation or signature requirements on the portal, while existing borrowers have until then to upload their files.

“There are definitely livelihoods at stake.”

What the end of the program means for applicants who say they have been waiting for months and years remains unclear. But Pifer argues “there are definitely livelihoods at stake”.

Chen eventually got a $7,500 loan under the Paycheck Protection Program, but it wasn’t enough to avert a financial crisis. She and her husband were forced to open a line of credit with a local bank and ran out of personal credit cards. They also had to lay off a full-time employee, which slowed their business growth and strained the remaining workers.

“None of this would have happened” if we had received the grant, Chen said. “If we had all the different federal aid we might have been eligible for and got it in a timely manner, we wouldn’t be in debt right now.”

Some candidates who had waited months or years finally got a decision.

Tabota Seyon owns InfusedLife, a vegan cafe and shop in Minneapolis that included spaces for women of color to sell their wares. It opened in January 2020. In the summer when it reopened after lockdown, Seyon struggled to attract customers. The city has been rocked by protests over the killing of George Floyd by Minneapolis police. Thereafter, she continued to face obstacles thanks to the pandemic: each time she or a member of her family contracted Covid-19, she was forced to close again.

At the end of 2020, Seyon said she lost thousands of dollars and even became homeless for a while. She applied for an EID loan at the end of the year, but didn’t get a decision until March 2022 – and it was a denial due to her credit rating. In the meantime, she had missed a rental payment and the landlord decided to evict her.

Other business owners have been rejected more quickly, but claim they were wrongly rejected and never heard of their appeals. KB Brown, owner of a Minneapolis printing company, Wolfpack Promotionals, said he received an EID loan of $49,000 in 2020, but it wasn’t enough. Even with the money, his business plummeted by more than 90% and he was forced to lay off all of his employees. Brown’s PPP loan application was also rejected, so he requested an increase in the EID loan after the SBA raised the cap. He was hoping to receive at least $100,000, he said, so he could stay afloat.

In response, the SBA said parts of its request caused it to “question the validity of certain information,” according to a copy of the letter. Brown said he sent additional proof of his company, including a reputable letter from the state, but rejected the raise.

“We needed help,” said Brown, who appealed the decision in early February and said he had yet to hear back. Now Brown said there were only two employees left and one of her two embroidery machines had broken down. He recently went to a bank to ask for a loan of equipment so he could buy a new one – the extra money from EIDL would have covered that and allowed him to hire another employee, he said. he declares.

In total, the lack of additional funding has cost him about $70,000 in potential business, in part because his remaining employees are overstretched, Brown said. He started a commercial cleaning business on the side to earn extra money.

There is no clear plan to add more funds to the EIDL program, but members of Congress have urged the SBA to move existing funds to partially continue it. Senators Chris Van Hollen and Ben Cardin, both Democrats from Maryland, said they wrote to SBA Chief Isabella Casillas Guzman asking her to release money for pending applications and appeals.

“Senators urged the SBA to use its transfer power to accommodate borrowers who wish to undergo a modification, rehearing or appeal,” according to a May 6 statement. “By closing the program prematurely, the agency appears to have prioritized its own administrative needs over those of the thousands of borrowers awaiting decisions on their applications.”

Pifer, of Majority Small Business, said he would “like to see those dollars stay in those programs to make sure those people who have been left behind, who are still waiting, that those dollars get to them.”

For now, business owners like Seyon, Brown, and Chen have been left to fend for themselves one way or another. Chen said loyal customers and local support organizations are the only thing keeping the Cha community alive. “I realized that the city of Waco, the residents and the nonprofits here, have helped us more than the federal government, which is pretty unfortunate.”

More stories like this are available at bloomberg.com

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