Business

Why Some Small Businesses See Little to No Relief – NBC Bay Area

Since
March, in four separate pieces of congressionally approved legislation
including the CARES Act, the federal government has spent more than $810 billion
backing small business loans to help retailers, restaurants, and local shops
cover their expenses and keep workers employed during the coronavirus pandemic.
Despite the unprecedented spending, several local business owners tell the NBC
Bay Area Investigative Unit that those federal dollars have yet to find their
way to those who need it the most.

The federal Small Business Administration (SBA) oversees the processing of U.S. government backed loans. But the SBA has yet to provide a full list of recipients to the public. So NBC Bay Area’s Investigative Unit began digging through SEC filings. The Unit searched through hundreds of corporate regulatory documents and found more than 80 public companies based in California that reported receiving more than $200 million in small business loans.

Recipients
of SBA money include software companies, chain restaurants, an investment group
that owns more than a half dozen boutique wineries, a memorabilia authenticator
and the owner of a peer to peer lending app employing more 400 workers.

HAVES AND HAVE NOTS

“(Big
Companies) are getting it easy. They have a team that they can put together to
handle all the (paperwork) and everything, so they can get that money very
easily as opposed to us,” said Alameda-based small business owner David
Molenberg.

For three years, Molenberg worked to build his corporate food service WowCater. The web-based caterer matches food kitchens with high tech corporate offices looking for a good meal.

Before
the pandemic, Molenberg says the company roughly doubled its revenue every
year. But after health officials shut down all nonessential office
buildings, Molenberg says he’s struggled to stay afloat. He used to employ
anywhere from 12 to 15 drivers at one time. Now he can barely keep a handful of
drivers working.

“Overnight,
all our orders completely have evaporated, it seemed, because everybody’s
working from home nowadays,” said Molenberg. “One of the unfortunate things is
that as an office caterer, I’m only allowed to keep my employees busy for a
couple hours per day.”

In
March, Molenberg applied for a Paycheck Protection Program loan (PPP) online. But
he says his application was rejected without explanation. Last week, Molenberg
reapplied and was approved for $1,200. But he says that’s still not enough financial
backing to keep his dozen or so delivery workers employed.

“I
need to keep my drivers paid,” Molenberg said. “I think it needs to be a lot
more organized. Things are a mess.”

Real
estate agent Shadi Alkhudari agrees. Alkhuadari says his East Bay business was
also devastated by COVID-19. 

“We
weren’t able to have any open houses, weren’t able to show any houses,”
Alkhudari said. “It almost crippled our business.”

Alkhudari
applied for a $30,000  Economic Injury
Disaster Loan (EIDL) through the SBA to cover his mortgage payments plus
business expenses. After two months, Alkhudari says his loan was finally
approved for $1,000, far less than what he requested and needs.

To
make matters worse, Alkhudari says the rules state he would have had to pay
back the $1,000 loan over 30 years.

“I
thought it was a mistake, I thought the loan officer missed a zero or two or
three,” Alkhudari said. “I had to decline it and give it back to them. Looking
at how other corporations are getting millions, even though they don’t need it.
. . And this is called Small Business Administration, it was a little
pathetic.”

“I
feel it’s a broken system, it’s not meant to be (for businesses like mine). 
Even though it’s called (the) ‘Small Business Administration,’ it’s not meant
to be for small businesses,” Alkhudari said.

When
NBC Bay Area examined Securities and Exchange Commission filings the I-Unit
found those records show that some corporations decided to give the SBA money
back and explore other options when those companies realized they were
competing with even smaller businesses for the federal relief funds. 

SBA IS OPEN FOR BUSINESS

“Right
now, there’s no backlog for PPP applications. At the beginning (of the process)
what happened is that banks had to learn how to process all these applications,”
SBA spokeswoman Miryam Barajas told NBC Bay Area. “The communities depend on
these mom and pop shops to stay open.”

Barajas
says her district office in Sacramento is working around the clock to process
PPP loans, which covers payroll for 8 weeks, as well as processing applications
for the Economic Injury Disaster Loan (EIDL) program which covers a company’s
other business expenses.

When
asked if the SBA could have handled the distribution of federal CARES Act money
better from the start, Barajas said the need and the demand was unprecedented
and the agency did the best it could.

“With
the first CARES Act, within the first 14 days, we gave out (in dollar amounts) what
we normally give out in 14 years. We’re the smallest agency in the federal
government” Barajas said. “There’s still money there. If you struggled with us
in the beginning and didn’t apply, don’t wait now, there’s still money there.”

However,
Barajas acknowledges that businesses applying for an EIDL advance are still in
for a wait.  

“EIDL
loans, we’re trying to catch up with those loans as quickly as possible. I know
we are working 24/7 to process them and those are the loans that are going to
pay some of the expenses that are not covered by PPP so we’re asking (business
owners) be patient,” Barajas said.

HELP
IS ON THE WAY

Meanwhile,
state and local agencies in California are working to fill the void left by the
federal bureaucracy and provide aid for those companies left out by the rules
of the CARES Act.

Emily Burgos with the California Infrastructure and Economic Development Bank (IBank) manages the state’s small business disaster loan guarantee program. So far IBank has backed $3 million in loans to California companies.

“We are really trying to capture folks that absolutely cannot access the SBA (loans),” Burgos said.

While
most business owners have never heard of IBank, Burgos says she’s working to
spread the word and anticipates the agency will be able to back $100,000,000
million in loans to 2,000 small businesses.

“I
am expecting huge numbers throughout the summer. And a large increase in
participating lenders coming very soon.” 

[[links
to local small business loan programs]]

Any
meaningful financial assistance can’t come soon enough for small business
owners such as Shadi Alkhudari and David Molenberg.

“It
feels like we’ve been left in the dust and that’s the unfortunate thing about
it, that small businesses are the foundation of this country. Most business in
America is small business,” said Molenberg. “It’s frustrating.”

“When
you need the emergency fund, you need it now. You don’t need it after, you
know, the emergency is over.” Alkhudari said. “I really don’t need (financial
help) next year, because that’s when, you know, everything will be done. It’s
either (with my business) I’m going to survive or I’m going to die. It’s a it’s
a swim or sink kind of situation.”

If you have a tip for the Investigative Unit, give us a call at 1-888-996-8477, or you can reach us via email at TheUnit@nbcbayarea.com

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