NYC Small Businesses Still Waiting On Federal Loans Under Second Round Of Funds

On Monday morning, applications reopened for another $310 billion in small business loans through the Small Business Administration after the first round of $349 billion in funds dried up in two weeks. Bankers spoke of technical issues within hours of the online system reopening. By 1 p.m. Tuesday, more than $52 billion in 475,952 loans had been approved under the second round of loans under the Paycheck Protection Program, according to the Small Business Administration.

But some small businesses were still left hanging, desperately waiting for the loans to come in to keep staff employed as business has plummeted during the COVID-19 pandemic.

One of those business owners is James Chen, who owns a print shop, Marketing Blink, and a local delivery app, GoHive, in Flushing, Queens. Chen applied for the PPP loan, which has the possibility of being forgiven later, in the first round, but the online application portal wasn't available through the bank until four days after the initial application period began.

He's been banking with Chase for a decade, which has been "horrible during this time," he said.

"They're not helping small businesses," Chen said, adding that he is disturbed at how officials are using the phrase "small businesses" for the PPP loans. "They shouldn't use that word. It makes me want to puke. It makes me sick."

His application has been in the review stage since mid-March, he said.

Chase spokesperson Anne Pace said the company cannot comment on individual customers, but that the bank is submitting applications to the SBA as quickly as it can in the order they were submitted, disputing criticism suggesting large corporations have been prioritized.

Big businesses like Shack Shake and Potbelly Corporation received $10 million, and Ruth's Hospitality Group received $20 million in the first round of funds, which they ultimately chose to return. AutoNation received $77 million in small business funds, which it also said it would return on Thursday, according to the Washington Post.

"I have no faith at all. We've always been left behind," Chen said.

So far, 300,000 business owners have filed loan applications to Chase and a "large portion" have been submitted to the SBA. Pace declined to provide an exact number, which is constantly fluctuating, but the Times reported April 22nd that 18,000 had made it through the first round.

SBA spokesperson Carol Wilkerson noted the average loan size has so far decreased from $207,000 to, so far, $111,000. 85 percent of the loans are $150,000 or less, she said. New lenders can participate in the second round even if they did not in the first round, and $60 billion in loans have been set aside for smaller lenders (with less than $50 billion in assets).

Chen believes the program's $10 million loan cap and 500-employee limit is too high to benefit small businesses.

Chen employs about 18 people between his two businesses. His delivery app GoHive used to have 200 restaurants on the platform. Now, 30 remain open. Chen hasn't paid April rent for one of his office spaces for Blink Marketing in Downtown Flushing. At a separate office location, the landlord offered a 50 percent rent decrease.

East Asian communities like Flushing were already suffering even before the novel coronavirus was confirmed in New York City. Chen says business has been down since the weekend of Chinese New Year in January.

Mom-and-pop shops are "always at the bottom," Chen said. "It doesn't matter how much contributions you make to this country here."

On Tuesday, President Donald Trump and Treasury Secretary Steven Mnuchin touted the success of the program, with small business owners detailing how the program will benefit them during a press conference.

In response to big businesses "inappropriately" obtaining loans, Mnuchin said "any loan over $2 million will have a full review for forgiveness before they're repaid because this is the story of small businesses here," Mnuchin said.

"I want to assure the American public and the American taxpayers we will make sure that these certifications were done accurately or the loans won't be forgiven and there will be liability," he added.

The American Bankers Association has said it is counting on federal agencies to fix technical problems causing a backlog of loan applications.

Robert Bookman, who runs a seven-person liquor license law firm, Pesetsky & Bookman, said: "If my loan didn't get in, I can't imagine how other small businesses...got theirs in."

"A lot of them didn't because their banks weren't there for them," he added. Bookman's law firm is counsel to the NYC Hospitality Alliance and represents restaurants and bars seeking liquor licenses, largely on the west side of Manhattan. As the hospitality industry has come to a standstill, liquor license applications to local community boards plummeted this month, from about 30 applications typically to five at boards 2 and 4, Bookman said.

The ripple effects on business has been "unbelievable, incalculable," he added.

Bookman has been banking with Citibank for about three decades. But the bank was "not responsive" when SBA loan applications first opened up on April 3rd. The online portal through the bank opened several days later, and Bookman filed his application as soon as the portal opened online, having already gathered payroll and other required documents he knew he would need.

"How could mine have not gotten in, in time?" Bookman said. "Unless one of two things--unless you guys are solely incompetent that nobody got in...[or] they weren't doing it first come, first serve, or small business; they were picking and choosing, probably, the larger customers."

Which, he added, "is not what they were supposed to do, not what they said they were doing."

Citibank was among banks revealed to be prioritizing large businesses, opening up the application process for customers with a minimum account size of $25 million, submitting paperwork that a banker would then file on their behalf, the New York Times reported earlier this month. The bank "strongly" disagreed with the Times's reporting, but confirmed that some businesses could process applications manually while the online portal was built. As of April 23rd, Citi rolled out $1.1 billion across 6,573 loans. The company announced Wednesday that about 75 percent of its loans were for less than $150,000 and about one-third were for less than $25,000.

Citibank spokesman Drew Benson said the company is working as quickly as possible and the goal is to secure funding for as many small businesses as possible.

"Small Business Banking customers applying digitally for PPP funds receive a series of communications apprising them of the status of their application, including confirmation that information was received and uploaded, when an application is ready for submission to the SBA’s E-TRAN system and whether the application was successfully accepted by the Small Business Administration," Benson said. "Given the volume of applications being submitted by several thousand banks, we cannot guarantee that an application will be funded nor where it sits in the queue."

This article has been updated with additional information from Citibank.