Small businesses left empty-handed as Paycheck Protection funds run out
Daniel Gomez, co-owner of DanielShay's Salon Boutique Spa, applied for a Paycheck Protection Program loan through his bank. On Wednesday, April 15, Gomez learned he was approved, but his excitement was soon squashed when it was announced Thursday, April 16, the federal program was out of money. (Mark Weber/Daily Memphian)
The $349 billion emergency small business lending program, the federal Paycheck Protection Program (PPP), officially ran out of money Thursday, April 16, leaving small businesses that applied for assistance wondering if relief will ever come like it has to more than 1 million others.
The depleted fund was particularly crushing news for Daniel and Shana Gomez, who have owned DanielShay’s Salon Boutique Spa in Cordova for 16 years.
After many conversations, the couple decided to continue to pay their 33 employees their average salary – roughly $18,000 per week – even though the salon has been closed for weeks due to COVID-19 and social distancing.
Daniel Gomez applied for a loan through the PPP as soon as applications were available through his financial institution, six days after the PPP funds were announced. On Wednesday, April 15, Gomez learned he was approved, but his excitement was soon squashed when it was announced Thursday the federal program was out of money.
“The biggest frustration was the way our bank set it up because you had banks big and small, Friday afternoon (April 3) accepting applications, and ours didn’t do it until Thursday (April 9). So, we’re a week behind,” Gomez said.
He noted that his small-business banker did everything she could to help him, but her “hands were tied.”
Gomez believes companies that do more business with banks and have more loans and employees were processed first, leaving smaller businesses like DanielShay’s in the backlog of applications.
“The bankers I know, they went for their biggest people first on their list who had more loans and employees,” he said. “We got shut down and restaurants and other people aren’t working, and we’re trying to do good by the employees.”
Gomez is still unsure how he and his wife will be paid, since they are not technically contractors, but are not paid out of the business. However, he is optimistic that PPP funds will be added – it’s just a matter of when.
“I thought it was cool to pay our people and pay the rent until we start up again,” Gomez said. “I was so optimistic. It has been very taxing every day to try to figure this out and go through this.”
The PPP, provided by the CARES Act through Small Business Administration, provides up to $10 million in forgivable loans to small businesses if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest or utilities.
To put things in perspective, in 2019 the SBA approved 58,000 loans through its two main programs for a combined $28 billion. Between April 3-13, 2020, the SBA approved 1,035,086 loans under the PPP for $349 billion, and more may be coming.
In a letter dated Thursday, April 16 on its website, Terry Turner, president and CEO of Pinnacle Financial Partners, said the financial institution took nearly 12,000 applications in 12 days, worth a total of $2.3 billion in loan requests.
“We processed, got approval for and are working to fund $1.8 billion of that,” Turner wrote. “To put that in context, our entire bank holds $19 billion in loans. It took us 20 years to get there. We were tasked with growing it by 12% in just 12 days, and we succeeded in growing it almost 10%. We didn’t hit the target, but we got closer than anyone would have thought.”
While the Treasury Secretary is working to increase funding for the PPP program, an agreement by Congress has not been finalized.
U.S. Rep. David Kustoff, R-Memphis, is among many who have called for increased funding for the PPP.
“The Paycheck Protection Program has provided a lifeline to thousands of West Tennessee small businesses whose everyday operations have been disrupted due to the coronavirus,” Kustoff said in a statement. “… I urge Democrats to put their political agendas aside and deliver this critical relief to our small business owners and workers during this difficult time,” Kustoff said in a statement.
The National Federation of Independent Business (NFIB), the country’s leading small business advocacy organization, also called on Congress Thursday to act to provide additional funding.
“America’s small businesses are on the brink, trying desperately to keep their doors open and support their employees. … We urge congressional leaders to prioritize America’s small businesses above their political disagreements and immediately provide additional funding for the Paycheck Protection Program,” NFIB president Brad Close said in a statement.
Christin Yates
Christin Yates is a native Memphian who has worked in PR and copywriting since 2007. She earned her B.S. in public relations and M.S. in mass communications from Murray State University.
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