Small businesses already frustrated with paycheck program

Small business owners applying for federal aid on Friday say they are confused about the requirements to participate in the Small Business Administration’s Paycheck Protection Program.

Business owners said they are unclear about what information they must provide to get a loan under the government initiative, part of the $2.2 trillion economic relief package signed into law by President Donald Trump last week. Although the government’s portal for the loan program opened on Friday, some banks also say they aren’t ready to handle an expected influx of millions of applications.

The loan program, funded by both private lenders and the U.S. Treasury Department, could provide a lifeline for millions of small businesses because the provision is offering loans worth as much as 250% of their average monthly payroll, up to $10 million. But anxiety is running high as some business owners worry the $349 billion earmarked for the program could run out before they can even complete their applications.

“You almost can’t be a small business by definition and understand this small business loan program that is meant for us, because you don’t have someone on staff who can research and understand it,” said Mike Derse, director of business development at Learning Express Toys, an educational toy franchise. 

“How it’s being communicated to the small business owners out there feels like it’s not being done from their perspective,” he added. 

Derse said he called both his banker and the SBA, but was frustrated at what he described as a lack of clarity. “I spoke to three agents, and none of them had any idea what I was talking about. They had never heard of the CARES act or of PPP. There is so much confusion and uncertainty around this.” 

Here are questions other small business owners are asking as the the program launched Friday.

Do I qualify as a small business if I have VC funding?

Colin McIntosh, founder and CEO of Sheets & Giggles, is unsure if his Denver-based bedsheet company qualifies as a small business under the terms of the program. He has six employees — none of whom he has laid off — but said he’s not sure if he’s eligible because his company has raised venture capital funding. 

In order to be eligible, a company must employ less than 500 people, according to SBA rules. 

“The bill is extremely poorly written,” McIntosh said. “It gathers together all the affiliates of your investors, and my investors invested in 100 different companies which combined have more than 500 employees. Does that mean we don’t get relief under the PPP? There are exceptions if they don’t have a controlling stake, but there is a lot of confusion.”

Inside the financial struggles caused by the coronavirus pandemic

Lisa Curtis, founder of $5 million Kuli Kuli foods runs a 12-person team. The company counts Kellogg’s — which has more than 30,000 employees — as an investor. 

“We have some very large investors and are looking into what rights they have to make sure they don’t conflict with the guidelines. There could be a scenario where the SBA looks at us and says, ‘You don’t have 12 employees, you have 12 plus all of Kellogg’s employees,'” Curtis said. 

What documentation do I need to apply? 

Isaac Bendrao, who owns a Learning Express toy store franchise in Aventura, Florida, has eight part-time employees who are all currently working from home because of the virus. 

“We are trying to get all the information that we need, but we haven’t been told exactly what that is, or what exactly is required of us. But because everyone is asking their accountants for the same thing, it might take them a little longer to get everything in order,” Bendrao said.

He, too, complained the SBA program is confusing. “I wish they would get straight to the point and not beat around the bush and say, ‘This is how you apply, this is when you will receive the funds and this is how you must spend them’. That is the kind of explanation we are looking for.” 

Is there enough funding?

While Bendrao’s storefront is closed, he is still delivering toys to those customers who browse the store’s inventory online or through its windows. 

“This is not how we love to do business. Learning Express is a fun place to shop and we are friends with our customers, but unfortunately this situation requires it,” he said.

He needs help, but said that even if he does get a loan, he doesn’t think 2.5 times his average monthly payroll will be enough to sustain his business. 

When will I get the money?

“We need the money next Thursday because we pay our employees bi-monthly,” Bendrao added. “Our last payroll was last week and our next payroll is coming up. It’s not yet clear when we will get the loan, and we haven’t even been able to start the process.”

“I hope the money doesn’t run out and reaches those people that really need it,” he said.

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