Business Owners Waited Years for Covid Loans—and Now It’s Too Late

 Business Owners Waited Years for Covid Loans—and Now It’s Too Late


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Jaja Chen and her husband Devin Li were thrilled when they signed a lease for their new bubble tea shop, Cha Community. Both Asian-American immigrants (he’s from Taiwan, he’s from China), they said it was a struggle to find authentic Asian food in their new home in Waco, Texas. So they decided to host a pop-up at the farmer’s market. Later, they moved to a food truck. Finally, they opened an actual brick-and-mortar storefront where they could serve customers tea and dumplings.

Chen signed the lease and boarded the plane the next day to visit the family in Taiwan. While there, he began to hear the “inklings of Covid.” A few months later, with the couple returning to Waco preparing for their grand opening, pandemic closures hit. Cha Community remained closed for another two months. All told, they lost about $ 20,000 from the bat.

At the time, Chen decided to apply for emergency assistance under a set of new programs offered by the U.S. Small Business Administration. The couple applied for the same 3.75% fixed-interest loan under the Economic Injury Disaster Loan program as well as a $ 10,000 advance grant, which will get their application a day before it opens. public on March 20, 2020.

Two weeks later, they checked in with the SBA and were told the advance grant was coming, Chen said. Chen said they were once again approved for the $ 20,000 loan, but it was turned down because the grant was on its way. But more than two years later, the grant still hasn’t arrived. “Until now, we don’t know what happened,” Chen said.

He is one of hundreds of small business owners who say they have been waiting the best part of two years for help from the SBA. In a new survey released Thursday by Small Business Majority, a national network of small businesses and community organizations, about one-third of the 201 small business owners surveyed said apply for an EID loan saying they did not get a response, or any money, from the SBA.

And now the SBA says funding for the program is likely to run out in the next few days.

As part of the federal government’s initial response to Covid-19 and the sudden halt experienced by the U.S. economy in the initial lock-in, the SBA was tasked with launching relief for businesses of many sizes. The EIDL program is actually at the forefront of the pandemic, albeit on a smaller scale (it provided $ 3.6 billion in disaster loans in 2018 compared to more than $ 369 billion in previous years).

The agency is quick to run into problems, said Brian Pifer, vice president of programs and research at Small Business Majority. The pandemic requires “a huge ramp up for the agency on a national scale,” he said. The agency had “a capacity and staff issue” so small businesses “just fell into the cracks.”

In a statement, the SBA did not respond to complaints from small business owners saying they did not receive a determination of loan applications or grants. The agency said it has increased the capacity to process EIDL pandemic -related loans and accelerated the rate at which application decisions are made. The agency also said the backlog of more than 600,000 loan increase applications has been cleared.

During the pandemic, the SBA also raised the cap on EID loans, allowing businesses to apply for increases of up to $ 500,000. But of respondents to the Small Business Majority survey, nearly one-third of those applying for the raise said they hadn’t heard anything yet. And of that group, nearly one-third said they had waited more than a year.

“Even if Congressional allocations for the Covid EIDL program are about to run out, the SBA will continue to help our small business owners navigate this challenging change by leveraging what we have. already resources, “according to the agency. The agency says borrowers in the process of completing applications have until May 16 to complete any documentation or required signatures on the portal, while borrowers have until to download their files.

“There are lives hanging in the balance.”

What the end of the program will mean for applicants who say they have waited many months and years remains unclear. But Pifer argues that “there are definitely lives hanging in the balance.”

Chen eventually got a $ 7,500 loan under the Paycheck Protection Program, but it wasn’t enough to avoid a financial crisis. She and her husband were forced to open a line of credit at a local bank and multiply their personal credit cards. They also have to lay off a full-time employee, which slows down the growth of their business and puts a strain on the remaining workers.

“Nothing would happen” if we received the grant, Chen said. “If we had all the different federal assistance we could have qualified for and got it in a timely manner, we wouldn’t be in debt now.”

Some applicants who wait for months or years finally get a decision.

Tabota Seyon owns InfusedLife, a vegan café and boutique in Minneapolis that includes spaces for women of color to sell their products. He opened the doors in January 2020. In the summer, when he reopened after the lockdown, Seyon struggled to attract customers. The city was rocked by protests over the murder of George Floyd by Minneapolis police. Afterwards, he continued to face obstacles due to the pandemic: Every time he or a family member contracted Covid-19, he was forced to shut down again.

By the end of 2020, Seyon said he had lost thousands of dollars, and even became homeless for a while. He applied for an EID loan later in the year, but didn’t get a decision until March 2022 — and it was a rejection because of his credit score. In the interim, he paid no rent and the landlord moved in to evict him.

Some business owners are more likely to be rejected, but argue they were wrongly rejected and never heard back their appeals. KB Brown, owner of Minneapolis-based printing company Wolfpack Promotionals, said he received a $ 49,000 EID loan in 2020, but it wasn’t enough. Even with the money, his business fell more than 90% and he was forced to lay off all his employees. Brown’s application for a PPP loan was also rejected, so he applied for an EID loan increase after the SBA raised the cap. He hopes to receive at least $ 100,000, he said, to keep him afloat.

In response, the SBA said parts of its application made it “question the validity of certain information,” according to a copy of the letter. Brown said he sent additional proof of his business, including a letter in good standing from the state, but the government rejected the increase.

“We need help,” Brown said, who appealed the decision in early February and said he hadn’t heard from it yet. Now, Brown says he has two employees, and that one of his two embroidery machines has broken down. He had just gone to a bank to apply for an equipment loan so he could buy a new one — the extra EIDL money would have covered that as well as allow him to hiring another employee, he said.

Overall, the lack of additional funding cost him about $ 70,000 in potential business, in part because his remaining workforce is so thin, Brown said. He started a side -by -side commercial cleaning business to bring in more money.

There are no clear plans to add additional funding to the EIDL program, but members of Congress have urged the SBA to divert existing funds to be part of its continuation. Senators Chris Van Hollen and Ben Cardin, both Maryland Democrats, said they wrote to SBA chief Isabella Casillas Guzman asking her to release money for pending applications and appeals.

“Senators urge the SBA to use its transfer authority to accommodate borrowers who wish to submit for a change, revision, or appeal,” according to a May 6 statement. “Through the timeless closure of the program, the agency appears to prioritize its own administrative needs over the thousands of borrowers awaiting decisions on their applications.”

Pifer of the Small Business Majority said that “he wants to see the dollars stay spent on programs to make sure those people are left, still waiting – that those dollars get to them.”

Right now, business owners like Seyon, Brown and Chen are forced to mess up in any way. Chen said loyal customers and helpful local organizations are the only things that keep the Cha Community alive. “I realize that the town of Waco, the locals and the nonprofits here, have helped us more with help than the federal government — which is a bad thing.”

More stories like these are available at bloomberg.com



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