Masked visitors see the art at the Estamos Bien exhibition in El Museo del Barrio. The museum has reopened but with limited capacity.
Michael palma mir
When the Paycheck Protection Program ran out of funding in the first week of May – weeks before the May 31 deadline – it was a huge surprise to the staff at El Museo del Barrio in New York City.
The upper Manhattan Latino cultural institution was counting on a second draw loan from the program to recover from the severe impact of the pandemic, which shut down the museum for months and forced it to cancel two major fundraising galas .
âThis raises a lot of questions about how we are going to end our fiscal year,â said Ana Chireno, director of government and community affairs for the museum. “We’ll have to go back to the drawing board at some point.”
El Museo del Barrio first applied for a second PPP loan in March after analyzing the numbers and deciding that it was a good fit for this program, instead of the grant for closed site operators (at first, companies did not could not apply for both.)
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This loan was rejected twice, the museum said, likely due to a problem as he applied to a non-profit, even though he applied to Cross River, the same bank he used. for his first-round loan last year.
In April, museum officials re-applied to other financial institutions, believing they had more than enough time to be approved and funded by May 31.
Even if the museum is once again open to limited capacity, the funding would have been of great help. Last year, the institution received a P3 loan of approximately $ 460,000 – 2.5 times the monthly payroll for the fifty or so employees – which helped it stay afloat.
âThe PPP loan changed everything,â said Patrick Charpenel, executive director of El Museo del Barrio. “It gave us a lot of stability – we were able to keep all of our staff and found a way to be an active institution through our online business.”
The end of the PPP
Millions of other borrowers are in the same situation after the $ 292 billion allocated to the second P3 round passed weeks before the May 31 deadline.
At Womply, a fintech that connects borrowers and lenders, there were 2.5 million requests in their system, said Toby Scammell, founder and CEO of the company. Of that number, 1.6 million are in the hands of lenders who cannot send them to the Small Business Administration, which oversees the program.
Clients Bank had tens of thousands of applicants in its pipeline, while non-bank lender Fountainhead had more than 90,000 who were shut down when the PPP money ran out.
âIt was a huge shock,â Scammell said. “I don’t think anyone in the industry expected this change last week.”
The paycheck protection program has been a lifeline for many companies criticized by the coronavirus pandemic. Established last year by the CARES Act, it provided forgivable funding to companies that made loans primarily to payroll. In January, the program reopened for a new round and allowed some businesses to secure second-draw loans.
The program was also marred by frustration, especially in the second round, when increased fraud checks led to more error codes and longer processing times. In addition, the many changes have left borrowers and lenders scrambling to keep pace.
In February, the Biden administration further expanded the program’s eligibility and changed the formula for calculating loans for sole proprietorships. Then in March, Congress voted to extend the program until May 31 from March 31 to help meet continued demand.
âThe program never really took hold,â said Rohit Arora, managing director of Biz2Credit, an online loan broker.
Small businesses continue to suffer
Other borrowers had problems applying in the second round, which caused them to lose funding.
This year, the program has been an “absolute disaster,” according to Anthony Bonelli, president and owner of Bonelli & Associates, a bookkeeping and accounting firm in New York City.
Bonelli & Associates was able to secure a first-round PPP loan for around $ 25,000 and also helped many clients in the process, he said. But the second round was not that easy. His claim – and those of many clients – was still pending when the SBA ran out of funds.
“They were apparently changing the rules every day,” Bonelli said, adding that the rule change and additional hurdles made the process long and complicated. He started his candidacy in early March.
âI’m trying to give everyone, you know, a reason not to blow a joint all over the process,â he said, referring to why it was so hard this time around. .
Lenders also said the lack of advice from the SBA made things more complicated.
âWe could have stopped the apps, and we could have educated our customers more,â said Arora, adding that Biz2credit had slowed down but not stopped new apps before the program deadline.
More transparent information would have helped some borrowers who delayed applications to file their tax returns first, or took some time to download all documents, he said.
Other options available
To be sure, there is still some hope for companies that missed the general pool – the SBA has set aside around $ 8 billion for applications from community financial institutions. Until the end of May, or while funds set aside are used up, the program will only accept new applications from these organizations.
This means that companies could cancel their pending loans and reapply at such an institution in the hope of being able to secure part of the financing.
There are other SBA programs that businesses can apply to. If eligible, businesses can apply for the new Restaurant Revitalization Fund or the Closed Site Operator Grant program. And, the SBA still offers economic disaster loans.
But some businesses are not eligible for the new, more targeted programs and may already have EIDL loans.
Carey Yazeed, who runs Shero Productions LLC., A change management agency based outside of New Orleans, applied for a second-draw PPP loan in mid-March.
When the PPP funding ran out in May, she was still trying to correct an error code on her application. Kabbage, the agent she applied to, had her social security number on paperwork instead of her employer identification number, she said.
She missed about $ 12,000 in funding, she estimates. She is not eligible for new grant programs.
âI tried not to cry,â she says. “It wasn’t a mistake on my part.”
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