By David Martin —
Over the past few weeks, millions of dollars have flowed into Eastern Shore small businesses through the Paycheck Protection Program, part of the federal government’s massive relief program to help businesses crippled by effects of the COVID-19 pandemic. For some small-business owners, however, the application process has been a struggle. And for business owners whose PPP loans have been approved but who have not received any money, the wait is ongoing and agonizing.
PPP was designed to help small businesses stay in business and keep employees on the payroll during this crisis. The PPP loans charge 1% interest with the principal forgivable if the majority of money is used for payroll and overhead such as mortgage interest, rent, and utilities. The loans were available to companies with fewer than 500 employees. Total money on the table: $349 billion. And it was depleted in less than two weeks.
Now the PPP has received a second round of funding: $310 billion, which Congress passed last week and President Trump signed on Friday. Early estimates were that it might be assigned and gone in as little as two days. But this Monday, the backlog of PPP applications overwhelmed the system, which crashed—frustrating small businesses making loan applications and lending institutions trying to file those applications. The backlog of applications probably numbers in the hundreds of thousands, and the businesses being helped will be vastly outnumbered by those needing help.
Why?
The main reason is that the need is so much greater than the relief that’s being offered. The gap between need and relief might simply never be closed, not by taxpayer dollars. But another reason is that small businesses like those on the Shore had difficulty with paperwork, couldn’t upload forms on unreliable internet connections, and often had to rely on super-helpful bank employees to get the loan applications through the system. Big corporations got these small business loans because they had lawyers, accountants, and first-class status with big banks. The big corporations qualified for these small business loans by showing that their individual locations employed fewer than 500 employees.
To be fair, three-quarters of the PPP’s $349 billion went to loans of $150,000 or less with another 13% of the loans being between $150,000 and $350,000. But that doesn’t help the optics.
After Shake Shack, the restaurant chain with some $100 million cash on hand, received the maximum $10 million from PPP and started getting some backlash, the company’s CEO and chairman said they didn’t realize the money would run out so fast and “it didn’t seem right” to them to keep the PPP funds when their company had other resources that so many small businesses did not have. They gave it back.
A public shaming has led to some giant companies giving their PPP money back
Finally, even Ruth’s Chris Steakhouse, which got $20 million (the $10 million PPP maximum given to two different properties) said it would return the money. But not everyone is following suit.
CNBC asked the largest 41 publicly traded companies that received PPP loans if they would be returning the money. Six said nope, they’re keeping the dough. Five said they’re planning on returning it. And 30 either didn’t respond or said they were thinking it over.
By the way, the $20 million that Ruth’s Chris Steakhouse gobbled up could have funded 2,000 loans of the kind being requested by C. D. Marsh Jewelers in Onancock.
Michelle Marsh said she had problems filling out the necessary PPP forms and uploading documents, especially when she logged out and had to start the entire process over again upon logging back in. Sabrina Paylor was Marsh’s contact at Atlantic Union Bank, and Marsh acknowledged the process was hard on the bank people, too, because so much of it was new with regulations being presented for the first time.
Marsh said Paylor was so patient and “sweet and she ended up opening the bank door just a crack because that’s all that was allowed” to make sure forms got in for the loan. The Marsh Jewelers loan has been approved but no money has been received yet. Marsh said, “We’re asking for under $10,000 but it might make the difference between us being able to reopen or not.”
Betsy Pinder, of Pinder Massage Therapy in Onancock, had a similarly positive experience with her Shore United bank. Acknowledging that she is not computer savvy, she eventually turned over the documents to the bank and had people there complete the application. The good news: her loan has been approved. The not so good news: no money yet.
Rep. Luria said applicants have a better chance when working with community banks
In an exclusive interview with the Eastern Shore Post, Rep. Elaine Luria, who represents the Eastern Shore in Congress, said that PPP loan applicants who work with small, local, community banks probably have a better chance with their applications. That was the case for the Eastern Shore Post, which has received its PPP funds and was aided through the process by Scott Schreiber at Atlantic Union Bank.
It also helps when the applicant has an ongoing relationship with his or her banker. That certainly was true for Hunt Addison, who operates Eastern Shore Events & Rentals in Exmore. Addison said he and his partner had an ongoing relationship with the same banker the Post worked with, Atlantic Union’s Scott Schreiber, and “Scott was in our corner the entire way.”
Addison called Schreiber as soon as the crisis began to ask about loan forgiveness and Schreiber put Eastern Shore Events & Rentals on the radar for any programs that might become available. When PPP was announced, everyone was ready. “We went back and forth a couple days to make sure we had all the i’s dotted and t’s crossed,” Addison said, “and within a week we had approval and less than a week later we had our money.”
Addison’s business caters to events of large gatherings, which are exactly those prohibited during the COVID-19 pandemic crisis. He said that some spring weddings have been pushed to the fall but that otherwise his business has taken a big hit and it’s the PPP money “that is keeping our doors open and allowing us to keep on two full-time employees.”
Regarding Atlantic Union and Scott Schreiber, Addison said, “I can’t thank the bank and Scott enough.”
Atlantic Union CEO John Asbury told the Eastern Shore Post that the bank has approved 73 PPP loans in Accomack County for a total of $4,540,000. In Northampton County, the bank approved 48 PPP loans for a total of $3,420,000.
Approval rate, when taking out applications that were abandoned or duplicated, was 80%, according to Asbury. He said that during the first round of funding, which opened April 3, the bank was accepting applications only from its own clients. When the funding ran out, the bank continued taking applications. “But this time, we opened up the application process to all businesses, but we will continue to prioritize assisting our existing clients.”
The Post did not attempt to survey all banks doing business on the Shore but did get comments from a couple, including Scott Beatty, CEO of Shore United Bank, which has been cited by Shore businesses as being especially helpful in attaining PPP loans. Beatty told the Post that Shore United has done $617,000 in PPP loans in Northampton and Accomack counties as of Tuesday of this week and that “we are neck-deep in the next round of PPP…trying to get all our applications in before this round is exhausted.” Beatty also noted that Shore United Bank has donated $5,000 to the area’s food bank.
Gary Cochran, who owns the Charlotte Hotel and Restaurant in Onancock with his wife Charlotte Cochran, ran into problems with the local branch of a giant chain bank. He received conflicting information about when his application would be accepted and what kind of information was needed. When asking for help, the basic response was, “Don’t call us, we’ll call you.”
Unsure if that big-bank call would ever come, Cochran turned to Kabbage, an online business funder that had stopped lending money during the crisis but was permitted to participate in PPP. As part of its outreach, Kabbage had contacted Cochran, who responded with an application that was approved. But, again, no money yet.
Waiting for the money after you’ve been approved is like waiting for anti-venom after you’ve been bitten
Cochran characterized the situation this way: “It’s like being bitten by a rattlesnake and then hearing the anti-venom is ‘on its way.’ They say ‘on its way’ is good news but when the poison is in your system, ‘on its way’ isn’t all that comforting.”
In the Charlotte’s case, the poison is business being off at least 75% in the restaurant and 99% in the hotel. “The town has helped by delaying payment on our business license and we’re also making partial payments on our utility bills and paying interest-only on our mortgage. But what has really kept us in business is support from our customers.” He said people are responding to the restaurant’s new carry-out business and some are buying gift certificates to be used when the restaurant reopens. One regular hotel guest has booked and paid for five nights to be used when the pandemic restrictions are lifted.
“The only reason we’ve been able to keep on employees from our hotel and restaurant staff is the tremendous support from this community,” Cochran said.
Rep. Luria has a staff person dedicated to helping small-business people navigate these government loan and other tricky waters: Jonathan Gerstell (757-364-7632). She also maintains an Eastern Shore Office at 25020 Shore Parkway, Suite 1B (757-364-7631), which is in the Onley Town Center.
Luria is especially passionate about getting money for people in the fishing industries. Her office released this statement: “In March, Congresswoman Luria supported the passage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This bill provides $300 million in relief for the fishery and aquaculture industries that have experienced the harsh effects of the COVID-19 pandemic. This includes a drastically decreased demand for seafood across the U.S. supply chain, which has resulted in a loss of markets.”
NOAA says, and has been saying for some time, that it’s doing all it can: “NOAA Fisheries understands the urgent need for these funds, and our overriding goal is to distribute the assistance as quickly as possible. To that end, we are working daily with the Department [of Commerce] and our federal partners to finalize a process to expedite the distribution of Sec. 12005 funds, consistent with the direction provided by Congress.”
Rep. Luria told the Post that she has talked with people in the fishing industry and has been made aware of how acute the situation is. “Eighty percent of seafood is sold in restaurants and that market has gone way down, of course.” Fishermen have told her how the price per bushel of oysters has cratered.
But another problem with that $300 million of CARES money is, according to what Luria told the Post, “it has to be split up around the country and I think maybe something like $6 million will come to Virginia. The funds go to the states and then the states will administer to the people. We don’t know when. We’d like to see it coming in a matter of weeks, not months.”
Rep. Luria hopes to add seafood to the $3 billion in ag productsbeing purchased by Ag. Dept.
As reported in last week’s Post, the U.S. Department of Agriculture is purchasing up to $3 billion in agricultural products to be distributed to those in need. This will include $100 million per month in fresh fruits and vegetables, $100 million per month in a variety of dairy products, and $100 million per month in meat products. Rep. Luria told the Post, “We’d like to see seafood added to that [$3 billion in agricultural products] but we don’t know yet the process for allocating the money.”
