Small businesses dealing with the dramatic drop in cash-flow caused by shelter-in-place orders and social distancing thought they would have a quick $10,000 in federal assistance to weather the storm. But for many, the program initially set up for natural disasters has thus far failed to pay out.
David Lee owns Blue Moon Construction and employs one other person. They do specialty land clearing for property owners in St. Petersburg, Florida. He opened in 2006 and made it through the Great Recession.
He said in a time when 80% of his industry closed, he prided himself on never missing any payments. But now, in the midst of another historic unemployment and economic crisis, it feels different.
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“We started seeing some weakness in sales in early March and it’s like staring into oblivion,” Lee said.
So, Lee along with more than 1 million other businesses across the country applied for an emergency injury disaster loan, or EIDL.
Historically the program has helped natural disaster victims like those from Hurricane Harvey. The U.S. Small Business Administration goes into a community and offers low income loans with 30 year repayment schedules. But the process is long.
When the $2 Trillion CARES act passed, it expanded the program and — recognizing businesses needed cash quick — added an advance of up to $10,000 dollars. A business didn’t have to wait to qualify for the loan and wouldn’t have to repay it. And unlike the Paycheck Protection Program — which has significantly more funds and is focused on keeping employees on the books — this money could be used for rent and bills right away.
The money was supposed to be in people's bank accounts within three days.
Lee was hopeful.
“You know we had projected $10,000 would get us through June 15,” he said.
But the money hasn’t shown up,and the SBA changed how it would be doled out. Now each business would be allotted $1,000 per employee. So instead of the $10,000 Lee expected, he was looking at $2,000.
“That is going to severely impact our ability to cover our operational costs and meet our equipment loans. It's a nail in the coffin for small companies.”
Many of the smallest and youngest companies have few employees, and these are the most desperate for capital, according to a recent Federal Reserve Bank survey. A Brookings report estimated that 2 million businesses in the U.S. are working without more than a few weeks worth of reserves.
And that assumes these businesses get any money. Twitter and Reddit are awash in comments from business owners saying they haven’t heard anything from the SBA, not even a confirmation email after submitting their application.
“No. no email or call or there's no place to put in a confirmation number on the website and check status,” said Kim Yonkee, who runs a series of retail stores with her wife in Eureka Springs, Arkansas.
Their stores have been closed since March 20th in this town that is more ghost than tourist at this point. She says she tried calling the local SBA but no one picked up.
Others TPR interviewed for this story described being on the phone for hours on multiple occasions only to be given conflicting information.
“I think you have a lot of really terrified, desperate, angry people who can't get any help,” she said, “And the businesses who can't pay their bills and who can't pay their landlords, who can't pay their banks, who can't pay. You know, I think it's a chain reaction. It's a domino and it starts right here with the small businesses.”
You guys are lying. Lawsuits are coming. You lied about getting a $10,000 advance. Lied about it being given even if you get denied. Lied about it being funded in 3 days. Meanwhile people are losing everything.— Amanda (@arhawley21) April 6, 2020
Ted Langley is a Certified Public Accountant in Spanish Fort, Alabama, outside of Mobile. All last week he helped neighbors and friends file for EIDLs and still they keep coming.
“I bought lunch, brought it back and I never got the first bite of french fry before I already had two phone calls from people asking me about the EIDL program” said Langley.
He estimates he’s helped 50 area businesses file so far. None have seen any money. Many are giving up hope they ever will.
“It’s the worst mess I've ever seen in my life,” said Langley, a former IRS agent.
Congress set the three day limit for the SBA. Four senior democratic lawmakers sent a letterexpressing concern about the delay in the money getting to businesses last week.
"The CARES Act included a requirement that a $10,000 grant be awarded within 3 days of an application to the SBA’s Economic Injury Disaster Loan program to help cover operating expenses while waiting for the loan processing. Are SBA staff prepared to fulfill this requirement?" asked the Senators.
The SBA hasn’t responded to comment for this story, but it is clear they are inundated with applications for both EIDL and PPP.
“The SBA has received an overwhelming number of Economic Injury Disaster Loan applications since the announcement of the Economic Injury Disaster Loan advance grants was made,” said a tweet from SBA Massachusetts.
“Frustration out there is understandable. Rome wasn’t built in a day,” said a separate tweet from SBA Mass.
It committed to getting the advance out — under the new lower terms — this week.
It was later deleted.
Despite the troubled roll out of both EIDL and PPP, it isn’t clear that everyone in the government is on the same page.
“They’re not behind. It’s been a flawless — It’s been flawless so far, far beyond our expectations,” said President Donald Trump in a Saturday Press Briefing when asked about the federal response.
David Lee was watching, and was disgusted.
“It's really insulting,” he said. “And, you know, we're the guys who are out there every day. And we were overlooked.”
For many businesses the slow response has left them feeling abandoned, and any response may come too late.
Paul Flahive can be reached at Paul@tpr.org or @PaulFlahive.
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