‘I am just panicking’: Small businesses scramble to apply for shutdown loans

Elizabeth Haegele didn’t get much sleep this weekend.

Haegele owns Fine Garden Creations, a Delaware County-based landscaping company that works across the Philadelphia area. Landscaping has been deemed a “life-sustaining” service by Pennsylvania Gov. Tom Wolf, but last week Haegele decided staying open put her staff in too much danger: she shuttered her business and laid off 11 full-time workers.

The timing is particularly painful. “April, May, and June, these are the three months out of the year where landscapers make any money at all,” she said. “There are a lot of questions [about] whether I can proceed.”

So Haegele jumped at the chance to apply for the Paycheck Protection Program: a $349 billion pot of federal government-guaranteed loans offered by the Small Business Administration to help businesses with fewer than 500 employees keep workers on the payroll during the coronavirus shutdown. Businesses can have their loans forgiven if they keep all their employees on the books for eight weeks — and quickly rehire those that have been laid off — and the cash is used for payroll, rent, mortgage interest, or utilities. Applications for the loans, which are administered through banks and other lenders, opened on Friday and the funds could reportedly run out within weeks.

The loans are first-come, first-served, so Haegele was anxious to get her application in quickly. But on Friday morning her primary bank, PNC, was still not accepting applications. Haegele tried instead to apply for the loan through American Heritage Federal Credit Union, which she has a business checking account with, but the website crashed before her application could be processed.

Haegele was ultimately able to submit her application with American Heritage — around 5 a.m. Saturday morning.

“I [was] just panicking basically, because I felt like the future of my business is riding on this,” she said.

Small banks sidelined 

Haegele is one of the lucky ones.

Many community banks were not equipped to accept applications until days after the window officially opened.

“Almost forty percent of our members could not access the system until Sunday evening at 10:30 p.m.” said Kevin Shivers, President and C.E.O of the Pennsylvania Association of Community Bankers, which represents about 75 community banks. “Many of these banks have a backlog of applications in the hundreds.”

By Monday afternoon, Shivers said 15 percent of his member banks were still struggling to access the federal portal for processing loans, and those who do have access reported it was buggy at best.

Community banks across the country have struggled to process loans, letting applications pile up while larger banks like Wells Fargo and Bank of America have been processing requests for tens of billions of dollars.

Those banks have prioritized their existing customers, a decision that could hurt minority-owned businesses, which are more likely to work with small and community lenders than white-owned businesses, according to research from the Federal Reserve.

On Saturday, Jovita Carranza, who leads the Small Business Administration, tweeted that the agency is working to allow more community banks to access the program.

“The system is up and running” Small Business Administration Press Director Carol Wilkerson wrote in an email. “We continue to process, approve, and guarantee billions of dollars of loans per hour.”

But many Philadelphia-area small business owners are still stuck in an anxious holding pattern, worried that the money will dry up by the time their application goes through.

Lou Rodriguez owns Rodriguez Consulting LLC, a civil engineering and land-surveying company based in Philadelphia. He said he had his documents ready to apply for a loan through First Bank of New Jersey Friday morning, but the bank wasn’t ready. So he waited.

“It was stressful,” Rodriguez said. “I had CNBC playing all day and you’re hearing Bank of America is lending money, [and] you’re wondering how’s that possible?”

Rodriguez said he was able to submit his application by 4 p.m. Friday. As of Monday afternoon he said, the bank could not offer a timeline for a decision.

For some, a risky option

Some Philadelphia-area small businesses say that, despite being desperate for cash, they are wary of applying to the Paycheck Protection Program — worried it will ultimately saddle them with more debt.

The loans are designed to encourage businesses to maintain their staff or quickly rehire those who have recently been laid off. If the loans, which max out at a little more than two times a businesses’ monthly payroll, are mostly used for staffing costs, they can be forgiven. But if the money is spent on other things, payments will come due.

“That’s really risky,” said Anna Shipp, Executive Director of the Sustainable Business Network of Greater Philadelphia.

Shipp, whose organization serves over 250 businesses in southeastern Pennsylvania, said some of her members haven’t applied for the program because they are concerned that they won’t be able to continue their businesses beyond the life of the loan at their pre-shutdown levels.

“They don’t feel comfortable rehiring because that’s going to jeopardize their laid off workers’ unemployment, and they might have to lay them off again,” Shipp said.

Those concerns are a big part of why Meagan Benz, co-owner of Crust Vegan Bakery in Philadelphia, chose not to apply to the program.

Benz has already laid off her eight full-time staff and told them to apply for unemployment.

“We are worried about the rate at which we are going to be able to pick business back up and be back at even a portion of where we were,” Benz said. “So we are not going to be able to bring on a payroll that is even close to what it once was.”

WHYY is one of over 20 news organizations producing Broke in Philly, a collaborative reporting project on solutions to poverty and the city’s push towards economic justice. Follow us at @BrokeInPhilly.