As stay-at-home orders began to take hold of DFW and the entire nation, many small businesses proactively sought to make sure that they could keep paying their employees should the shut down exhaust their cash reserves. Some businesses have been frustrated with the process and the changing requirements, while for others it has been relatively smooth. But few have received any money.
On March 27, President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, making $349 billion in loans and grants available to small businesses. The federal Small Business Administration has a number of options for employers to access those funds, the largest of the two are the Economic Injury Disaster Loan (EIDL) program and Paycheck Protection Program (PPP).
The EIDL includes a $10,000 grant that businesses were supposed to get in three days, which doesn’t need to be paid back, as well as $2 million in loans that do need to be paid back, but at a very low interest rate over the next 30 years. PPP allows businesses to borrow up to $10 million that is forgivable if they do not lay off employees or if they rehire laid off employees.
John Michael Stewart is an oral surgeon who owns John-Michael Stewart Oral, Facial & Implant Surgery in North Dallas. As non-essential business closed in Dallas and statewide, he lost all his revenue and began making preparations to see what could be done. For Stewart and others, the requirements for the EIDL and PPP have been a moving target, with stipulations constantly changing, and banks unable to distribute funds.
The first struggle came when Texas was a bit late to declare a state of disaster. When Cindy Brown, a partner at the accounting firm Brown Welch McAllister, went to begin the process two weeks ago, she was unable to complete the application because Texas had not yet declared an official disaster.
When a disaster was declared, there was a whole new process to apply, and accountants were frustrated that there was a lack of confirmation about which application had been received. In all, the EIDL application included 82 pages of documents for one client. And Brown and others have 60 clients with multiple entities, all rushing to get in line for relief.
For the PPP loan, regulations were shifting as well over the last two weeks. Documents verifying rent, payroll, Tax ID numbers, benefits, and the time period all changed numerous times as small businesses scrambled to get their applications in. “No one ever expected this. But if there was any type of disaster, we needed the banks to work, and no one ever dealt with that,” says Stewart, who is frustrated with political leadership. ” I’m trying to keep my employees paid, but they’re not helping.”
Finally, after one last change to the PPP requirements on Friday April 3, the regulations were set and applications could be completed. But with millions of applications and an overworked staff at the Small Business Administration, there is no telling when businesses will get their money, or how long the funds will last. Banks need to verify that they will be receiving money from the federal government before they start giving loans to businesses. “They’re stalling the process as much as possible because they want to be sure that they’re going to get paid back,” says Mitul Mehta, also a partner at Brown Welch McAllister.
Smith is worried that those who need the money most won’t get it. “It seems at this point those who actually need the money the most are the ones where it’s going to be the hardest for them to get it,” she says. “If you’re smart enough to have multiple layers of companies and payroll here and payroll there and pay yourself and pay your kids, you qualify just like the poor restaurant owner that’s been shut down or the nail salon that can’t be open or all of the other places that are legitimately a business with two employees.”
Many businesses only keep six weeks or less of cash on hand, because tax policies incentivize businesses to get those funds into circulation and keep business going. But that means they are in poor shape to handle a disaster like this. Dr. Richard Derksen employs 10 people at his dental practice Dallas Esthetics, and wanted to try and ride out the shutdown, but as the longevity of the crisis became clear, he moved to begin applying for relief. It has been a frustrating process. “The staff is the most important part of the practice – more important than the doctor in a lot of ways,” he says. “We want to take care of them and their families, and that’s where a lot of anger and anxiety comes from.”
Banks too, are fighting to keep up. The federal government’s constantly changing regulations made banks press pause on giving out any money until they were sure they are getting the required paperwork and will be paid from the federal government.”It’s been quite a ride, to say the least,” says Joshua Bustos, a business banking relationship manager for commercial banking and global wealth with BBVA here in DFW. “We’ve obviously had to work through a lot of kinks that we did not forecast. It’s been fluid throughout the process.”
Bustos and his colleagues have been working long hours preparing applications and loan products for their clients. “It’s unbelievable to think about how many people had to work tirelessly within the bank to get something in place in less than a week’s time,” he says.
Businesses work through their bank to access PPP funds, while the EIDL applications are directly completed by the federal government. Bustos says he has seen communication increase, and with a portfolio of 120 to 150 clients that entail 300 to 400 entities, it has been no easy task making sure they all have what they need to be eligible for the loans and grants available. But for the most part, Bustos says his interactions with clients have been empathetic, and he has started to see funds flow to small businesses. “The experience that I’ve had with clients is that they’ve been very empathetic. They know the amount of volume that we face and the fluid situation that we continuously have in regards to getting in applications.”
For other small business owners, the process has been much smoother. Some of that is due to the type of loans being sought, as the EIDL has apparently been much more delayed. Cooper Koch, who runs public relations firm Cooper Smith Agency PR and employs five people, has found the process very smooth.
He says he was contacted by his banker at Frost Bank to apply for the PPP, and said it was an easy process. Timing also played a role. He hadn’t been trying to navigate the issue for weeks like other business owners, which may have alleviated the stress. But while the application process went well, the money hasn’t yet been distributed. Koch saw his business go from 10 employees to one during The Great Recession, has a long view of what is happening, and is just doing what needs to be done one task at a time.
In a private Facebook group for Dallas PR professionals, he has been a resource for others navigating the process, and says the difference between those who are frustrated and those who have great service has been the size of the bank they have used. He has tried to offer advice as best he can in this fluid moment, and is better able to process his own problems when he shares the with others.
While it may be financial in nature, it may also be just what his peers need. “I’m either a great resource or a really annoying person depending on who you are,” Koch says. “I’m a very open and transparent about the ups and downs in my life, and hope that other people will learn from the story, laugh at the story, or be inspired by the story.”
To track which loans have been distributed and to whom, follow this COVI-19 Tracker for small businesses.