David Jacobs/ The Center Square
As small businesses go, NewAperio has weathered the COVID-19 recession pretty well.
While the Baton Rouge-based web and mobile app developer has a central office, founder and CEO Logan Leger said, the team already worked remotely. He employs five people directly and a handful of contract workers for certain jobs.
But while his people could stay productive, there wasn’t much new work coming down the pipeline once Gov. John Bel Edwards shut down much of Louisiana’s economy to slow the spread of the new coronavirus. Leger managed to get some relief through the federal government’s $342 billion Paycheck Protection Program before it ran out of money in less than two weeks, making his small company one of the lucky ones.
Leger deliberately went through a community bank, not the large corporate bank that handles many of his other needs. The rules changed more than once, so he drew up different documents for different versions of the program and was able to get in line on the first day funds were available.
“It was from the beginning a very chaotic experience,” he said.
Still, he hopes the PPP is renewed, calling it a crucial lifeline for many companies. And he hopes next time, the program is made available in a way that benefits more of the smallest firms. The first time around, the Small Business Administration’s fee structure incentivized banks to make bigger loans to bigger clients, Leger argues.
On Tuesday, U.S. Sen. Chuck Schumer, a New York Democrat, said a deal had been reached to allocate $300 billion more for PPP. Details were not available by publication, and some Republicans reportedly said the deal wasn’t quite done yet.
The SBA says 26,635 approved PPP loans worth more than $5.1 billion were made to Louisiana businesses during the first round, a total Louisiana Bankers Association CEO Robert Taylor said compares favorably to other states with similarly sized populations. He cites SBA data showing 74 percent of all PPP loans are for $150,000 or less, while 60 percent were approved by community banks, and said Louisiana banks are ready to get another infusion of money out as soon as it’s released.
“Bankers view the PPP as vitally important and have overcome issues of illness, remote working and skeletal staffing to work through a mountain of challenges presented by the program itself,” Taylor said.
According to a National Federation of Independent Business survey, some 80 percent of small businesses who had applied had not received their money by April 17, the day after federal officials announced the PPP was out of money. Many business owners didn’t know where their application was in the process.
“Small businesses were prepared and ready to apply for these programs, the only financial support options for most, and it is very frustrating that the majority of these true small businesses haven’t received their loan yet,” said Holly Wade, NFIB’s director of research and policy analysis.
Wade’s reference to “true small businesses” speaks to a common complaint about the program. Depending on the industry, a “small” business can have as many as 1,500 employees under SBA rules. And though the PPP was billed as small business relief, at least 75 publicly traded companies, some with market values of more than $100 million, reportedly tapped the program.
“How is it in any way fair to have a program where large loans to public companies are processed first (companies who need it least to survive) and the funds ‘run out’ if you are not first in line?” Charlie Bilello, founder of Compound Capital Advisors, said via social media. “The government is essentially picking and choosing who will remain afloat.” He also noted that no preference was given to “nonessential” firms that were forced to close and lost all of their revenue overnight.
Dawn Starns, who directs the NFIB’s Louisiana chapter, says the firms most disadvantaged when seeking PPP funds are those with fewer than 20 employees that might not have relationships with the right lenders. The smallest companies also are unlikely to be able to dedicate someone to the task of navigating the process, she said.
She says she has heard some NFIB members found a lack of interest from the large bank they normally use, though she thinks it was more of a matter of the banks not being very engaged in the program than a preference for larger clients, while others had better luck with a community bank.
“We just want to be sure that these super-small folks get a chance” Starns said.