This article was updated on April 23.
On the first day that funds for the initial $ 349 billion paycheck protection program became available, Ramona Fautini, owner of Common Ground Café in Beaufort, made a request “almost immediately” through her bank.
That was over two weeks ago, and her application remains online with hundreds more.
Many small business owners like Fautini have a question: what happened to my request?
“The whole process was supposed to be easy for small businesses. I filled it all in and waited, ”she said. “Mine was never approved. “
After waiting a week for the loan to go through his local bank, Coastal States Bank, Fautini tried out Wells Fargo in the hopes things would go faster. But Wells Fargo has stopped accepting new applications three days later the loan program started due to a deluge of requests.
The Coastal States Bank told her her application was currently “in the queue,” she said.
“We’ve had a lot of people who haven’t been successful because we’ve hit our capacity limit,” said Stephen Stone, president and CEO of the bank. “With a limited amount of funds and everyone trying to get it at the same time, it put the institutions in a very difficult position.”
Stone said CSB – which has operations on Hilton Head Island and in Bluffton, Savannah and the Metro Atlanta area – has been able to provide “approximately $ 100 million” in business loans over the course of the hectic two-week period.
Fautini is frustrated that of the more than $ 3.8 billion that has gone to SC companies, she has not been included.
Nationally, Congress and the White House are under pressure from large corporations that received PPP loans. Among them was Ruth’s Chris Steak House, a chain of 150 branches that received $ 20 million of the small business loan program.
The Potbelly’s sandwich chain, which has 400 stores, received $ 10 million.
Shake Shack, a New York-based burger chain with 275 locations worldwide, thereafter surrendered its $ 10 million PPP loan.
Common Ground has one location and five employees, only two of whom are full-time.
“I don’t know what’s going on behind the scenes,” Fautini said. “I have no idea what the process is.”
What’s the process?
The problem that drove a small business program to shut out thousands of small businesses is not what happened behind the scenes.
Everything happened in full view.
“None of this is against the rules. [Banks] followed the guidelines, ”said Frank Knapp Jr., president and CEO of the SC Small Business Chamber of Commerce.
“The guidelines simply left the process entirely to the private sector. Without guardrails, ”he said.
The Small Business Administration has fully guaranteed PPP loans to banks across the country. The loans were created serve as a lifeline for workers, and required companies to spend at least 75% of the money on payroll and the rest on payments such as rent or mortgages.
Small businesses could apply for the loans from their local banks, and banks would approve them to help businesses survive the coronavirus pandemic. But the $ 349 billion pot was to be awarded on a “first come, first served” basis, according to the US Treasury Department. rules.
The problem was the massive number of businesses that needed help.
After the PPP went into effect on April 3, the barrage of demands broke in South Carolina and across the country. The SBA declined to provide figures on the number of applications received by the program.
The banks were simply overwhelmed.
“We had bankers working late into the night after 1am and 2am and then from 5am and 6am for almost two weeks,” said Stone of CSB. “They worked all weekend, until Easter weekend” and eventually until the funding ran out.
With sites in Georgia, the Carolinas and Virginia, the South State Bank “received more than 10,000 inquiries” about obtaining PPP loans and was able to grant “more than half”, according to John Boretti , President of the Southern State of the Beaufort region. . He said in a statement that the loans totaled nearly $ 900 million in small business loans.
Pinnacle Financial Partners has markets in five southern states, including South Carolina, and has received about 12,000 applications and was able to grant about 6,000, according to spokesperson Joe Bass.
“Build an airplane and fly it at the same time”
CSB and Pinnacle have confirmed to the Island Packet and the Beaufort Gazette that, as has been the case with many banks, they have not turned down any new applicants but have given priority to existing clients when processing loan applications. .
Some small business owners, whose home bank may not have made PPP loans, should try their luck with other institutions.
These other banks had to make the difficult choice of accepting whatever they could or speeding up their loan applications. able to deal with the declining pot of money as they “raced against all the other banks,” according to Bass.
Part of the blame lies with the SBA who, Stone said, could have given a lot more advice. He said the agency only informed banks of the final regulations for approving loan documents 24 hours before the PPP went into effect.
“If there ever was an example of building an airplane and flying at the same time, it was this,” Stone said.
“A not very fair process”
There are about 400,000 small businesses in South Carolina that have fewer than 500 employees, according to Knapp.
When the SBA stopped accepting loan applications on April 16, nearly 23,000 had been approved in South Carolina, agency data show.
“We have a lot of needs there. We have a lot of requests for some kind of federal money to help them survive. The process turned out to be an unfair process, ”Knapp said.
An analysis of Bloomberg News shows the total SBA funding was not distributed evenly. States like Nebraska and North Dakota received a larger share in proportion to the number of businesses eligible for loans. South Carolina is 31st on this list among all states.
In addition, there is the question of what is considered a small business.
The PPP, as first conceived in the $ 2.2 trillion CARES Act, was only intended for companies with fewer than 500 employees. The Washington Post reports that after an intense lobbying campaign on the part of the catering and hotel industry, specific sites and subsidiaries have been added under the definition of small business, even if they were part of a national or international channel.
At least 75 publicly traded companies have received PPP loans, according to The Associated Press.
Greg White, the SBA’s SC district director, told the Island Packet and the Beaufort Gazette that the agency could not reveal the identity of loan recipients in the state.
The largest restaurant group on Hilton Head Island, the Southeastern Restaurant Entertainment Group, used to employ more than 800 workers and filed for PPP, according to Alan Wolf, president of SERG.
Interviewed by Island Packet and Beaufort Gazette if the SERG loan was granted, Wolf said “no comment”.
The second wave
The Senate approved a bill to more help against coronaviruses, providing $ 320 billion more for the expired PPP.
Of the new funding for the program, $ 60 billion would be earmarked for loans from small and medium-sized financial institutions.
U.S. Representative Joe Cunningham, a Democrat who represents South Carolina’s 1st District, has previously called for more oversight and regulation attached to the new wave of funding.
“Although I intend to vote for this legislation which we urgently need, I am frustrated that it has taken so long and that the package does not include the bipartite proposals needed to help working families get through. this crisis and get our country back to work, “said Representative Cunningham, in a statement to the Island Packet and the Beaufort Gazette.
The House is expected to pass the bill on Thursday, and President Trump has indicated he will sign it.
CSB, Pinnacle and South State banks have all told Island Packet and Beaufort Gazette that they will be able to speed up loan applications from small businesses that haven’t made the initial cut, each time the next round. funding will arrive.
For now, all small business owners like Fautini can do is wait.
“I hope that in the next round of stimulus we are taken into consideration,” she said. And she prefers to keep hope than to complain.
“I didn’t want it to look like bitter grapes,” she said. “I wanted to spread the word for people who need ([theseloans)Forpeoplewhohavebeenforgotten[theseloans)Forthepeoplewhowereoverlooked”[cesprêts)Pourlesgensquiontétéoubliés[theseloans)Forthepeoplewhowereoverlooked”
This story was originally published 21 April 2020 13:53.