Small business owners were stunned when PPP funding ended

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Masked visitors view art at the Estamos Bien exhibition at El Museo del Barrio. The museum has reopened, but the number is limited.

Michael Palma World

When funding for the Payroll Protection Program ended in the first week of May – a few weeks before the May 31st deadline – it came as a huge surprise to the staff at El Museo del Barrio in New York.

The Hispanic Cultural Institution in Upper Manhattan was counting on a second loan as part of the program to recover from the severe impact of the pandemic, which closed the museum for several months and meant it had to cancel two major fundraising galas.

“This raises a lot of questions about how we will end the fiscal year,” said Ana Cireno, the museum’s director of government and community affairs. “At some point we’ll have to go back to the drawing board.”

El Museo del Barrio first applied for a second PPP loan in March after analyzing the numbers and deciding it was suitable for this program and not for this program. Grant to operators of closed sites (at first, companies could not apply for both).

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The museum said the loan was turned down twice, likely due to a glitch because it was filed as a non-profit, although it was filed with Cross River, the same bank it used to get its first round loan last year.

In April, museum staff reapplied to other financial institutions, believing they had more than enough time to obtain approval and funding by May 31st.

Even though the museum is now open again with disabilities, funding would be of great help. Last year, the organization received a PPP loan of about $ 480,000, or 2.5 times the monthly salary for more than 50 employees, helping it stay afloat.

“The PPP loan changed everything,” said Patrick Charpenel, CEO of El Museo del Barrio. “This gave us a lot of stability – we were able to retain all of our employees and found a way to be an active institution through our online activities.”

End of PPP

Millions of other borrowers are in the same position after the $ 292 billion pledged for the second round of PPPs expired several weeks before the May 31st deadline.

Toby Scammell, founder and CEO of Womply, a fintech company that matches borrowers to lenders, had 2.5 million applications in its system. Of these, 1.6 million are in the hands of lenders who cannot send them to the Small Business Administration, which oversees the program.

The client bank had tens of thousands of applicants, while the non-bank lender Fountainhead had over 90,000 applications that were stopped when the PPP money ran out.

“It was a huge shock,” Scammell said. “I don’t think anyone in the industry expected this change last week.”

The payroll protection program has become a lifeline for many businesses affected by the coronavirus pandemic. Created last year under the CARES Act, it provided excusable funding for businesses that spent their loans primarily on wages. In January, the program reopened to a new round and allowed some businesses to obtain secondary loans.

The program was also marked by disappointment, especially in the second round, when an increase in the number of fraud checks led to an increase in the number of error codes and an increase in processing time. Also, due to the many changes, borrowers and lenders have struggled to keep up.

In February, the Biden administration further expanded eligibility and changed the formula for calculating loans for individual entrepreneurs. Then in March, Congress voted to extend the program to May 31 from March 31 to meet persistent demand.

“The program never really caught on,” said Rohit Arora, CEO of Biz2Credit, an online loan broker.

Small business still suffers

Other borrowers were having trouble applying for the second round, which meant they were missing out on funding.

According to Anthony Bonelli, president and owner of Bonelli & Associates, a New York-based accounting firm, the program was “a clear disaster” this year.

Bonelli & Associates was able to secure about $ 25,000 in a first round PPP loan and also helped many clients in the process, he said. But the second round was not so easy. His application – and many clients’ applications – were still pending when the SBA ran out of funds.

“It felt like they were just changing the rules every day,” Bonelli said, adding that the rule change and additional hurdles to overcome made the process long and difficult. He applied in early March.

I don’t think anyone in the industry expected such a change last week.

Toby Scammell

Founder and CEO, Womply

“I’m trying to give everyone, you know, a reason not to interfere with the whole process,” he said, referring to why this time it was so difficult.

Lenders also said the lack of direction from the SBA made matters more difficult.

“We could stop applications and we could keep our customers informed more,” Arora said, adding that Biz2credit slowed down but did not stop new applications before the program deadline.

More transparent information would help some borrowers who delayed filing their tax returns first, or spent some time downloading all the documents, he said.

Other options available

To be sure, there is still some hope for businesses that have not made it to the common fund – the SBA has donated about $ 8 billion in applications from community financial institutions. Until the end of May, or until the reserved money runs out, the program will only accept new applications from these organizations.

This means businesses can cancel their outstanding loans and reapply to such an institution in the hopes of receiving some of the funding.

There are other SBA programs that businesses can apply for. If they are eligible, businesses can apply to participate in the new Restaurant Restoration Fund or the Closed Establishment Operator Grant Program. In addition, the SBA continues to offer disaster loans related to economic trauma.

But some businesses are not eligible for new, more targeted programs and may already have EIDL loans.

Carey Yazid, who operates Shero Productions LLC., A change management agency based outside of New Orleans, applied for a second PPP loan in mid-March.

When PPP funding ended in May, she was still trying to correct the error code in her statement. Cabbage, the service staff through whom she applied, indicated her social security number on the paperwork instead of her employer identification number, she said.

She estimates she missed about $ 12,000 in funding. She is not eligible to participate in new grant programs.

“I tried not to cry,” she said. “It wasn’t my fault.”

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