Paycheck Protection Program, SBA Loans: Minority-owned Businesses Update
By Elia Esparza
According to Forbes.com, in an article written by Dane Stranger, “…the COVID-19 crisis is showing that many American small businesses have cash-flow issues and effectively live the equivalent of ‘paycheck to paycheck.’ Sharp declines in consumer demand can easily tip them into the red, and perhaps failure.”
It is the same for minority-owned businesses, and maybe more so, who are dependent on any Federal assistance offered. Yet, the first batch of stimulus relief issued was to larger corporate businesses, with over 500 employees, leaving out the smaller companies that are the core of small businesses. After being called out, companies like The Lakers and the Shake Shack were shamed into returning the millions of dollar loans they received. Who thought they were the small businesses that needed “saved”?
The Paycheck Protection Program (PPP), offers loans for up to $10 million, and the Small Business Administration (SBA) low-interest disaster loans. The first initial PPP loans allocated $439 billion and within two weeks they had run out of money. The new PPP bill passed congress with a bipartisan vote and was released with an additional $310 billion for loans (and $12 billion for SBA salaries and other costs). These loan programs are designed to help businesses meet payroll, make debt payments, and whatever other bills they must pay in order to keep their businesses going.
The new stimulus bill sets aside $30 billion for small lenders (with consolidated assets less than $10 billion) and $30 billion for midsize lenders (with consolidated assets between $10 billion and $50 billion) to ensure the more rural, women-owned and minority-owned small businesses get loans this round. *Source: Smartasset.com
Aside from banking institutions, there are other federally insured depository institutions, federally insured credit unions, Farm Credit System Institution, and select Fintech Lenders who are approved by the SBA as a 7a lender, PayPay, Google, and Quickbooks. The maximum PPP loan amount is 2.5 times your average monthly payroll costs, up to $10 million. Only one PPP loan per applicant.
“It’s not only a black and brown issue. It’s a statewide issue. It’s an economic issue.” – Rosario Ubiera-Minaya, Executive Director, Amplify Latinx
An NPR Radio WBUR-FM article, titled “Federal Aid Might Not Reach Small Businesses Owned By People of Color, Advocates Fear, (April 26, 2020), stated that concerns from “community development groups, along with advocates for Latinx, black, and Asian business owners, are worried that minority-owned small businesses could be left behind in the latest round of federal aid.”
Latin Heat chose two minority-owned businesses, who applied. One, did receive a PPP small loan, and the other hasn’t had any response to date. We checked in on them to ask how they’re doing during this pandemic crisis and how it has affected their businesses:
The Entrepreneur
Juan De Lira, Owner, Sherwood Florist Inc., City of Claremont CA
Mr. De Lira applied for both PPP and SBA loans, he was awarded a PPP loan in the amount of $31,500, a process that took about 10 days from start to finish. But it was not Wells Fargo where his business banks, rather a nearby community bank where he secured the loan. To date, he is still waiting to hear back from SBA.
Latin Heat: Tell us about your business.
JDL: We own Sherwood Florist Inc., and have been in business for about 37 years. We used to have several stores throughout the city but now we only have one left here in Claremont.
LH: You applied for a PPP loan?
JDL: Yes. Actually, we applied for both of the loans, the one that was the stimulus where they give you $10K, and we also applied to the SBA. We did also apply for the Payroll Protection Program (PPP), which is to cover payroll for eight weeks and it includes some extra money for other related expenses such as rent and utilities. We applied through our regular bank Wells Fargo, which we’ve been a customer for years. But when we applied, the program was already closed and that the funds had already been allocated. Mind you, they announced the program on a Saturday and we were there first thing Monday morning and were told, the program was now closed.
LH: How frustrating!
JDL: Yes. We couldn’t even fill out an application let alone submit any documentation to back up our request. But then I happen to talk to a friend who told me that I should go to other financial institutions in my community.
LH: He basically told you not to give up and keep applying!
JDL: Yes, and that’s exactly what we did. We applied to a local community financial institution here in the city of Claremont. They don’t even have normal banking functions like checking accounts. A friend of mine had recommended we try the local institutions and to even try Google and PayPal programs.
LH: Wow! You didn’t give up and how great for your friend to advise you about the Google and PayPal type of financial entities.
JDL: I’m so glad we paid attention and went scouting for other financial places. We found one place in my community. We spoke to them and they said, ‘sure you should apply.’ He gave us the application and we filled it out and went through them. And, a couple of days later they called asking for additional information relating to our corporation, insurance info, payroll records for 2019, and first quarter for 2020. We submitted those papers on a Monday and they told us that the loan package was in order and that they would submit it and get back to us in five days.
LH: Did they?
JDL: Sure enough, in five days, we called them and they said ‘your loan has been approved’ and that the loan approval was only good for two days. So we rushed in, signed the necessary paperwork, and a few days later we received our PPP loan of $31,500. It’s not a large loan but enough to keep us afloat for a little longer as we wait for the SBA loan to come through.
LH: Why do you think there are so many who have not been approved for a PPP loan?
JDL: Maybe it’s not giving up and not being easily discouraged. I recall hearing about the PPP loans on one Saturday and early the following Monday, I was at Wells Fargo, whom I’d been a customer for years, telling me the program was closed, no more applications being accepted. Later I mentioned to a friend and it was he who told me that I should go to the local community banks and other financial institutions… that they’d probably be more inclined and sensitive to the small business owner’s crisis because of COVID19.
LH: So not giving up is crucial—
JDL: Absolutely! I thought it was only banks giving out PPP and SBA loans. But there are many insured depository institutions offering PPP loans. Search within your community. Yes, even if our bank turns you down, do not give up. Instead press on and again, look at the lending institutions in your own backyard.
LH: You’re now waiting for the SBA loan?
JDL: Yes and while there are no guarantees because it is a bigger amount of loan, the PPP has provided some temporary relief.
LH: What’s your advice to other business owners?
JDL: To be patient and not give up. We persisted and we got approved for the PPP even though, supposedly, the funds had already run out. Try other financial institutions. The big-name banks are concentrating on those multi-million-dollar loans, clearly, they make more money in fees, but there are lending places like local community banks or mortgage firms that concentrate on small business loans. They have more loan quotas to fill, especially for smaller amounts.
On The Lender Side
Gina Linn Espinoza & Rene Quiñones, Chief Strategy Officer, Commercial Metroplex (Las Vegas, NV)
Commercial Metroplex is a SBA-certified lender, one of 300 agencies given delegated authority to speedily process PPP loans. The day before they were to launch their new portal to assist people with the processing of their small business loans, SBA informed them that all monies had already been allotted. After the shock and anger settled, Gina is applying her experience as a learning curve and has led her to a new mission of advocacy.
LH: Your experience comes through your husband’s company, Commercial Metroplex Lending Group. Can you tell us a little about your work?
GLE: As you know, we were gearing up the agents of Commercial Metroplex to call and help people with their PPP applications. We had our portal for 24 hours and were running tests when we were informed that the millions of PPP funds allotted had been exhausted and that the program was suspended.
LH: What?! And, you had no forewarning?
GLE: None. It was shocking and disappointing to find out that publicly traded large businesses had scooped up all the money set aside for small businesses. I was moved to tears and then became angry because I grew up in a small business. In fact, small business put me through private schools, ballet class, piano lessons, and put food on our family’s table.
LH: This has been deeply personal for you?
GLE: It has. The day the SBA ran out of money, I thought of the families that would be affected by this by the fact that selfish big business owners stole without considering small business owners and their families.
LH: I can tell this disappointment was painful—
GLE: Yes. It was all so sudden and without forewarning… It took me back to my own childhood, when at around 5 or 6 years old, I would get into my dad’s white 57 Chevy pick-up truck and drive around our small-town collecting coins from soda vending machines my dad had placed around town. We would drive to them, clean and restock them, and pull out all the coins and place them in a money bag to take to the bank the following day. That was our family business. So yes, I was extremely disappointed.
LH: Has this discouraged you from trying again when the next rounds of stimulus funds come around?
GLE: No. In fact to the contrary. I am who I am because of small business. And, after a good cry I made it my personal mission to get as many small businesses into the SBA portal system in queue for the next round of funding. I would use my superpowers for good. To date we’re reaching 2 million dollars of PPP loans into the queue for funding.
The following is PPP information offered by Gina Linn Espinosa:
• PPP are taken from banks and lenders. Only the EIDL application is directly from SBA website.
Contact Gina Linn at getwiselatinas@gmail.com