Last week, the U.S. Small Business Administration announced that funding for the Paycheck Protection Program and Economic Injury Disaster Relief (EIDL) program was exhausted. Without additional funding from Congress, the lending program established to offer economic relief to the small businesses impacted by the coronavirus pandemic would have been fully depleted less than two weeks after its launch.
For some small business owners, the Paycheck Protection Program has been a lifeline during troubled times. For others, it has turned into a confusing and uncertain quagmire. Here are what a few small business owners told business.com about their experience applying for the Paycheck Protection Program.
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What is the Paycheck Protection Program?
The Paycheck Protection Program was created as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The $2.2 trillion stimulus package allocated $349 billion for low-interest loans that could be forgiven in full if used for qualified expenses, such as wages and salaries.
Here are some distinct advantages of a Paycheck Protection Program loan as opposed to a typical loan:
- No application fees
- No personal guarantees or collateral requirements
- Fixed 1% annual percentage rate
- Deferment on the first six months of loan payments
- Partial or full loan forgiveness opportunities
Those attractive terms and the widespread economic need prompted by the coronavirus pandemic have caused small business owners across the country to rush for funding from the program.
On April 16, the SBA announced that funding for the program is exhausted and no more applications will be considered unless Congress makes additional funding available. Many small business owners with outstanding applications have questions about where they stand: Will they get any money from the program? Are their applications in limbo?
The answers have generally been difficult to come by. To learn more about how the Paycheck Protection Program has rolled out, business.com got in touch with some entrepreneurs who applied for funding through the program.
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Kendra Eaton, owner of Sprinkled with Pink
Sprinkled with Pink is a small business that creates custom accessories and apparel for special occasions, holidays, birthdays and more. The company employs five part-time and two full-time employees. Kendra Eaton, the founder and CEO, said the business applied for both an EIDL grant and a Paycheck Protection Program loan after furloughing its five part-time employees.
"We received a $7,000 advance, which was initially supposed to be $10,000, but it was changed to be $1,000 per employee," Eaton said of the EIDL emergency relief grant.
After receiving the initial allotment through the EIDL grant program, Eaton turned to the Paycheck Protection Program for help.
"It's an amazing program – I think it's really needed," she said. However, although she filed an application with Chase for a loan through the program on April 6, she has received almost no information on the status of her application. She also applied through PayPal, which was approved as a Paycheck Protection Program lender after the initial launch of the application period on April 15.
Eaton said uncertainty has been the defining factor of her experience since she heard that funding for the Paycheck Protection Program was exhausted.
"I have no expectations," she said. "The only way you're secure is if you have an E-Tran number; that means you're approved and shouldn't have to worry. We did not get that from Chase, and it's been about two weeks."
As of April 20, Eaton said the only update she's received was Chase saying her payroll information was being reviewed. She added that she's hopeful Congress will replenish the program with additional funding.
"If we don't get this funding, we'll have to reduce our workforce. We've already laid off five part-time employees … but if we do get it, we can bring back our staff, pay our rent and push our business forward to be successful coming out of all this."
Edgar Comellas, owner of Aces Wild Casino Parties
Aces Wild Casino Parties is an event rental business that provides casino-style entertainment, including casino tables with dealers, decorations, and exotic animals. Owner Edgar Comellas applied for a Paycheck Protection Program loan through Bank of America on April 6, as well as with Merrill Lynch on April 9. He said it's been difficult to get information about the status of his application.
"I applied for $10,000," Comellas said, adding that he had also received an EIDL grant for $1,000. "$7,500 of that was going to be for payroll. We want to pay our staff so they can cover their personal bills."
The remaining $2,500 would have helped pay rent and utilities, he said.
The impact of the coronavirus has been significant for Aces Wild Casino Parties, Comellas said, because no one is hosting events or gatherings. The Paycheck Protection Program is a much-needed source of short-term capital for the business.
"If I get no assistance and we are not open and semi-back to normal by August, then I would be looking at bankruptcy or would have to start selling things," Comellas said. "It's a pain in the back of my mind."
As Comellas waits to see if additional funding will be allocated to the program, he has considered some alternative sources of funding, though none are certain. Whether he relies on family and friends for a loan or seeks private funding, Comellas said he is concerned about how others are being affected and whether they would be able to extend resources to his business.
Ryan Graves, owner of Decades Psychedelic Daze
Decades Psychedelic Daze is a New York smoke shop with four locations that has been in business for over two decades. Owner Ryan Graves applied for an EIDL advance emergency relief grant through the SBA, but he did not apply for a loan through the Paycheck Protection Program before funding was exhausted. He currently employs 22 people in full-time and part-time capacities.
While Graves did not apply for the Paycheck Protection Program, he was approved for a grant of $1,000 per employee, which would be allocated to each of his four locations separately. However, he said he has not yet received the approved funding, and there remains a lot of questions around how the funding would be distributed to his businesses.
"We have management that works at multiple locations," he said. "Are they counted as one employee? We're still waiting to find out how they look at it."
Graves said that without the EIDL grant funding, he would likely have to consider closing one of his stores.
"[Funding] will be critical to keep all four stores open," he said. "If we can't get funding to help offset our rent – which is over $14,000 per month – we'll end up losing one of our slower stores."
That closure would impact at least nine of his employees. "Four of them would have their hours cut, and five would just be let go."
Graves said he is concerned about his options for alternative funding sources. "We could go to our bank, but the problem is the industry we're in is considered high risk. Banks don't care that I've been in business for 24 years; they see we carry CBD and e-cigarettes, so we get nothing."
What would help most, Graves said, is additional funding to relief programs specifically for small businesses, as well as a more streamlined application process.
Todd Spodek, managing partner of Spodek Law Group P.C.
Spodek Law Group P.C. is a law firm in New York City that provides litigation services for criminal defense and divorce and family law. Todd Spodek, managing partner of the firm and business.com community member, employs 10 people. Since courts are largely closed at the moment, Spodek said the business has largely been on hold. He applied for a Paycheck Protection Program loan through Chase on April 6. He was approved for a loan of $200,000 through the program, and the funding arrived in his account by April 17.
"I knew as [coronavirus began spreading] that our revenue each month was gone," Spodek said. "Forget cutting even, forget making a profit – it was gone. The question wasn't how to make money; it was how to stabilize staff to make sure they're comfortable."
Spodek said his staff are irreplaceable to his firm because they are involved in managing sensitive client relationships. Prior to applying, he gathered detailed documentation, including payroll reports, proof of expenses and bank statements from Chase, with which he has a long-standing business banking relationship.
Without the funding, Spodek said, he would be able to float expenses from the company's reserves for a short time. However, he's concerned about the impact that could have on other expenses. Getting the funding through the Paycheck Protection Program means his business can cover all those expenses – especially salaries and wages – for months to come.
"When I received that funding, it was like manna from heaven," Spodek said. "Nothing is more important to me than the stability of my staff. These are not people who can be replaced; I depend on them and they depend on me. I could've covered their salaries for a bit on our own reserves, but that would come at the expense of rent, utilities and marketing expenses."
Not only was the influx of cash from the Paycheck Protection Program loan a relief, Spodek said, but also the immediacy with which he received it. The 10-day turnaround from the time he submitted his application was instrumental in keeping his business on firm financial footing.
"We're all stable now," he said. "We have six months to carry the firm one way or another."
What does the future hold for the Paycheck Protection Program?
Unfortunately for many businesses, securing funding through the Paycheck Protection Program was not so easy. Uncertainty and excessive demand for funding means many who applied were left without answers, even after initial funding for the program ran out. Many applicants who remain frozen in the process are left eagerly waiting to see whether Congress will provide more funding to the program in the coming days.
The announcement that funding for the Paycheck Protection Program was exhausted came just 13 days after the application period officially opened. To the consternation of the many small business owners who had applications outstanding, little information was offered as to whether applications in the pipeline could still be eligible for funding. The news even led Shake Shack to return its $10 million loan from the Paycheck Protection Program because, as founder Danny Meyer and CEO Randy Garutti said in a statement, "the first phase of the PPP was underfunded and many who need it most haven't gotten any assistance."
Additional funding could be on the way, however. Congress is debating an additional $300 billion for the Paycheck Protection Program. U.S. Treasury Secretary Steven Mnuchin said Sunday that there was a tentative agreement for the additional funds, which could pass both chambers of Congress by as early as Tuesday morning. That would be $50 billion more than the funding proposed for the program prior to the announcement that funds had dried up.
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