The PPP/EIDL funding process upended the small world of business these previous months as places scrambled to remain open — and solvent — during the COVID pandemic shutdowns and closures. Since March, has paid focus on reader comments to put our finger around the pulse from the everyday business owners’ experiences.
In Early October, Treasury Secretary Steve Mnuchin said inside a pr release the government provided 5.Two million PPP loans worth $525 billion to smaller businesses, which saved 51 million jobs. Congress also added another $20 billion to the Economic Injury Disaster Loans program making the (up to) $10,000 advance forgivable.
Despite those numbers, the PPP and EIDL programs didn't give a lot of business people the assistance they needed. What went wrong? Why were small businesses denied those funds? And just what does the future look like when it comes to government COVID aid?
Keep on reading to discover the top five explanations why small businesses overlooked government loans throughout the coronavirus pandemic.
1) Issuing Banks Failed Big Time
The first, and most challenging, hurdle for many small businesses involved issues with the particular banks issuing the loans. It’s vital that you understand that the Small Business (SBA) itself doesn't directly lend money; it relies on partner finance companies and banks to really provide the cash. Instead, it smooths out the lending process by guaranteeing any part of the loan, making the procedure less risky generally.
When the PPP and EIDL programs launched, partner banks were unprepared to handle the volume of applicants.
- Banks were overrun with applications within hours
- Funds were depleted quickly
- Paperwork was filed too slowly, and with no good system for tracking applications
According to reader comments, Chase Bank and Bank of the usa, in particular, struggled with serious issues around applicants and applications. But in general, nothing about the rollout of the SBA loans was well-thought-out, which left many banks scrambling to generate their very own internal policies amid confusion. The general chaos inside the banking community meant that many business people, even if filing applications correctly, overlooked their piece of the PPP or EIDL funds.
Our reader Naomi wrote:
This PPP is such a farce on so many levels. We applied early with Chase, tried to check up on the status and was told they aren’t in charge of approving the loans and don’t have access to the applications. Essentially, i was told that that the applications automatically go straight to the SBA and the SBA looks at the applications. Whenever we called the SBA, they told us the precise opposite: The bank approves the applications and likely didn’t reach ours prior to the funds ran out — essentially it's just sitting there for two weeks! … The process generally has just been unbelievably inequitable from the start and never transparent … Shame on the Government.
Reader Kim replied to Naomi, writing:
Well said! I went through the same thing. Waiting, wondering, worrying… no answers, then BAM the money is finished. Then to hear Chase and the SBA gave millions to companies that, without doubt, have countless resources available. Resources that actual smaller businesses wouldn’t even qualify for. Shame on Chase and shame on the SBA as well.
Chase Bank was not alone in its failure to handle the SBA disaster loans rollout. Bank of the usa also came under heavy scrutiny for a way they processed their loans, producing a lawsuit from four small businesses that allege Bank of the usa prioritized businesses needing larger loans so they could maximize their own profits. Our readers experienced the same kind of forced delays in filing loan paperwork which are cited in the lawsuit.
Our reader Monica said, “Shame you, Bank of the usa! All documentation submitted and confirmed. Then nothing! After 3 decades as a small company banking customer, we are disgusted. Enjoy the $18 billion you will make while screwing your small business clients.”
The financial toll of COVID has affected all business owners, but it’s been particularly hard on those that provide essential services. Karen, an actual therapist and owner/founder of a clinic in Issaquah, Washington, wrote:
As an important healthcare business, we’ve remained open and have been providing care to our critical needs patients and many front-line responders in the COVID-19 crisis. Located in King County, we’ve been struggling since the original outbreak in Kirkland, Washington only 6 miles away. We applied through Bank of America for the Payroll Protection Plan within three hours from the process opening online on April 3, 2022. We uploaded our supporting documents within four hours of the email request them. Currently, we’ve didn't have response from BOA and can only assume we won’t be receiving any Federal assistance… I’m not sure what future opportunities may arise to fill this critical gap in funding for smaller businesses, but because a front-line doctor, I certainly hope some priority will be presented to businesses like ours.
Jocelyn, another physical therapist from Redmond, Washington, replied to Karen:
Like you, we requested the PPP through Bank of the usa (our business bank for 21 years) on the first day and did not end up receiving any funds. All on the way, it seemed there have been delays on their end. We would jump whenever they requested information, but then days would go by before we'd get another email. Eventually, the cash just ran out and we lost of luck. There is no one to provide us with any information. Now learning that BofA funded some larger companies that consumed millions instead of the small businesses like ours makes me really upset. I’m not optimistic about having any chance the second time around either.
2) SBA & Lender Technology Floundered
Another huge complaint about the PPP/EIDL process surrounded the major technology glitches that prevented people from navigating the application process with ease. Errors abounded, the most of common of which were:
- Small business owners never received log-in information
- Websites were overrun with traffic and timed out
- Applications didn't upload at all
- Users received error messages during the process and didn’t know how to proceed
- Applications were resubmitted because of website error after which flagged as suspicious
Even during the second round of funding, technology issues ran rampant. The SBA’s processing site experienced extreme slowing. In a comment to Fortune, the SBA said: “SBA notified lenders yesterday that pacing of applications into the E-Tran system would occur, meaning all lenders would be able to submit at the same rate each hour. The pacing mechanism prevents anyone lender from submitting a large number of loans an hour into the E-Tran system. If your lender goes above the pacing limit they'll get timed out.”
A handful of readers encountered an identical technology issue: Accidental flagging of potential duplicate applications. If computers timed-out along with a small company resubmitted, there is a potential for any double-submission. Or perhaps in one reader’s situation, she submitted applications to 2 separate businesses however it was still being flagged like a duplicate. Corina wrote, “I needed to call and ask them to reinstate the main application for my larger business.”
A reader named Smith wrote:
Today, I received the next email using the subject line: Multiple SBA Economic Injury Disaster Loan Applications. ‘We received multiple applications out of your business for economic injury because of Coronavirus (COVID-19). Your earliest application will continue to be processed and we have withdrawn [other] application number from active consideration.‘ Performs this mean I’ve been denied? I only submitted one application.
Reader Anne wrote:
My business was initially declined since the system though I’d applied many times. Turned out it was because, within the system, my application showed the same numbers for my banking account and routing number. There were a number of people from my bank who made the same mistake when applying, so it showed multiple accounts trying to get the borrowed funds — that have been considered duplicates — if this was really multiple people applying who use the same bank. My guess is there’s an insect within the software, but no use focusing on that to solve.
Our reader Valerie encountered similar issues with her EIDL loan after receiving mixed messages from the bank. She wrote:
After I confirmed my identity and approved the amount, it wouldn’t allow me to review and sign the documents. I received an email saying I had been approved to have an amount and it gave me the choice to select the maximum amount or perhaps a lower amount. I checked the [bank] online about Three hours later, and now the status shows declined and they'll email me using the details. I'm so confused, because they emailed me and explained that I was approved.
3) The SBA Wasn’t Prepared
News agencies widely panned the rollout of the SBA disaster loans having a slew of adjectives, including chaotic, sloppy, bumpy, flawed, glitchy, messy. An article from NPR outlined most of the problems surrounding the program and some from the questions that small businesses have about the funds. In general, users discovered that the SBA guidelines were too vague or they failed to respond to questions in a timely manner. Phone lines went down — telephone numbers that worked for some didn’t work with others. Misinformation and exhaustion reigned.
reader Micah captured the frustration a number of our readers encountered throughout the EIDL process. He wrote, “[I] just received a denial email. After jumping through so many hoops and re-entering my bank info, they simply decided to deny me.”
David wrote, “I acquired an email on 5/10 that my EIDL was being processed and created the account, gave verification and bank info… now, I visited check on it and also the status has gone from processing to DECLINED! It says I’ll get more information by email.. I was really counting on those funds, particularly when i was told that it had been processing.”
Reader Hollie responded to David’s situation with her own experiences, writing the same task became of her with her EIDL loan:
I got the email in the SBA saying congratulations your application is processing. It offered me a amount borrowed which i was approved for. I accepted the amount. Created the account, verified my identity, and set within my bank info… Then boom: Next day, Email saying I had been denied. Additionally, it said hello would send via email the reason for denial. Welp, that email never came. I’ve called and sent them emails asking what went down, but haven't yet hear back. That was two weeks ago.
4) Unqualified Businesses Snatched Funding Not Intended for Them
Shake Shack. The Laker’s. Potbelly. A handful of successful hotel chains. When the funds were dispersed and also the scrutiny started, small business owners who had been left out of the 2 rounds of funding were irate to understand that some companies that didn’t appear to meet the requirements were walking away with the majority of the time. The backlash, however, prompted most of the larger companies to return the cash.
Readers responded with frustration to the news that big businesses walked away with the money that smaller businesses have been promised. Throughout the first round of PPP loans, reader Lee wrote:
Our government has scammed us. I put on Chase to have an SBA loan during the first week. Our banker walked us through it. A few days later, he finally answered, after texting and calling him constantly. He explained the program ran from money, so our application was in the queue for the next release. Then, today, I heard that Shake Shack got $10 million! They have way over 500 employees. I can’t wait until November.
Reader MC shared an identical sentiment:
I realize that the PPP came with no instructions and it is extremely confusing. However it doesn’t excuse some blatant and grotesque approvals of loans to filthy-rich businesses. Take the La Lakers as an example. They were approved for $4.6 million although their estimated value is $3.7 billion! Why on the planet did they apply to begin with? It’s truly, truly appalling.
Reader D. Hewett wrote:
I work financing small business loans. I’ve been working and following up nonstop on programs to try and help other business owners. I filed end of March… There is no place to look for the loan application. If small business owners don’t die from the coronavirus trying to get promised funds will kill them. Meanwhile, large, large corporations got huge amount of money while little small business owners are becoming denied unemployment? No word on EIDL, denied or turned away from PPP. Haven’t received stimulus checks. I am one of those, and this shows me the ineptness in our government in each and every way from handling the coronavirus to disaster home loan programs.
5) Simple User Error
Lastly, another common thread among the denied was good old-fashioned user error. Thanks to hugely mixed messaging, and confusing and conflicting information from banks and the SBA, the process wasn’t smooth to begin with. Compounded with technology issues, many small business owners made simple mistakes in the application that slowed up the process or precluded them from receiving funds at all.
Many readers reported being told to repair issues, simply to have the cash run out in the meantime. Others had their credit pulled (and their credit rating affected by the pull), but experienced small errors that prevented their applications from fully going through. Faulty log-ins, wrong bank information, missing information — all those things led to loan failure. One reader was frustrated when she accidentally entered zero on her behalf loan amount and was not able to receive help from the SBA to fix the total amount.
Some smaller businesses which were denied due to error were allowed to submit reconsideration letters, although it is unclear how many of those went on to receive funds.
The Way forward for Government Aid During COVID
As this article would go to press, more COVID relief is being discussed, but there's no further news about the government’s plans for the smaller businesses still looking for aid. Using the November presidential election mere weeks away, it is apparent that COVID aid is definitely an election issue along with a government bargaining chip. However, while Federal aid might be in limbo, small business owners could also wish to check out other kinds of funding, including what their local governments are offering in terms of grants — as many state, county, and city governments are dispersing funds in the CARES Act to local businesses.
Follow on Facebook or Twitter for additional news content associated with the pandemic. Discuss social or on this article about your experiences or venture on to take a look at our COVID-19 hub — we’ll be also posting any need-to-know stories there.
