Island businesses line up for help

But some restaurants say SBA loans that are supposed to be a safety net are full of holes.

6
Martha's Vineyard Bank has been flooded with applications for Small Business Administration loans.

More than 700 businesses have applied for Small Business Administration loans through Martha’s Vineyard Bank and some received their funds as of Monday, James Anthony, the bank’s president, told The Times.

Anthony is asking other business owners to be patient as bank employees continue to work loan applications through the process. Calls to the bank pull employees away from that process, he said. He described the SBA’s Payroll Protection Program (PPP), which was part of the CARES Act (Coronavirus Aid, Relief, and Economic Security Act)  as “riding a bike while it’s being made.”

While Anthony acknowledged “frustration and consternation” about the stimulus money that’s been set aside for small businesses — $350 billion when an estimated $680 billion is needed — he said the bank has about 30 employees working to get PPP applications into the hands of the SBA for review as quickly as possible.

Robert Sawyer, owner of Barn Bowl & Bistro in Oak Bluffs, is one of the business owners frustrated by the PPP loan, which requires the funds to be used for payroll for the next eight weeks after the funds are dispersed and rehiring any laid off workers by June 30th in order for the loans to be forgiven. With Gov. Charlie Baker’s ban on restaurants and bars extending through at least May 4, Sawyer and other restaurant owners aren’t likely to qualify for the loans to be forgiven. 

“Obviously, the Barn, along with all restaurants and thousands of other small businesses, cannot hire since we are closed for the duration by order of the governor,” Sawyer wrote. “It gets worse. If we were to take this loan and immediately distribute 75% of the loan proceeds to our laid-off employees, they would not want it. The Catch-22 is the unemployment benefits in this same stimulus package are greater than their actual wages.”

Sawyer’s not alone in his criticism. In a story published by Barron’s, Andrew Rigie, executive director at the New York City Hospitality Alliance, said requiring companies to bring the number of staff back up to pre-crisis levels within two months was unrealistic. Rigie called on Congress to revise the program in the next round of legislation. “The PPP needs to be amended . . . in order to give the hospitality industry support,” he was quoted by Barron’s as saying. “We need grants, not loans and more debt.”

JB Blau, who owns several Island restaurants that are closed, is hoping that a second round of federal legislation will be more beneficial for restaurants. He’s in the process of applying for the PPP funds and hoping it could be funded closer to the summer when his restaurants are back in business. “We would use the money on paying other debts we’ve built up,” he said. 

The way the program is set up, it would be pointless to get the funding now. He would have to rehire staff and have them not work. Those employees who are laid off are benefitting from the $600 in additional unemployment benefits that are also part of the stimulus package.

“We’re hoping better plans come out in the next round,” Blau said. “It’s frustrating to have to need a bailout of any sort.”

Anthony said if the pandemic pushes the reopening of businesses beyond the June 30 deadline, there are likely adjustments that will be made to the loan program, though he acknowledged there are no guarantees.

There’s frustration that this was put in place and launched so quickly,” Anthony said. “SBA is trying to define rules as —  or after — they opened the floodgates, so that’s a source of frustration among banks in general and bank employees. We have to make a decision where we are focusing the thrust of our energy. We’re focusing on getting applicants through the process as much as possible, and as quickly as possible get the money in their hands.”

There are several steps in the process:

  • Submitting an application: The bank has an online system in place.
  • A pre-SBA review: A review to make sure all of the documentation is in place.
  • Submission to SBA: And then waiting for SBA to get back with an approval of the guarantee.
  • Draft the closing documents: Applicants can e-sign them.
  • Fund the loans.

U.S. Rep. Bill Keating, D-Bourne, defended the program as a way to help some businesses stay open and keep employees working. He added that even some seasonal businesses can benefit from the program because it allows them to use their payrolls from January of 2019 through June 30, 2019 to qualify.

“This isn’t easy. Guidance just came out a few weeks ago with the banks,” Keating said. “This is unprecedented stuff.”

He urged business owners with questions to call Andrew Nelson at his Hyannis office, 508-771-6868.

Meanwhile, Nancy Gardella, executive director of the Martha’s Vineyard Chamber of Commerce, said trying to help the Chamber’s membership is difficult. She knows the PPP is not right for every business, like restaurants, but it is helping some businesses keep their employees working.

Last week, she held a Zoom meeting so that business owners could share information and talk about best practices and she’s planning to hold more forums like it. “What’s right for them?” she said. “What are the pros and cons for each business? This is all so new and emotionally charged.”

6 COMMENTS

  1. It is a shame the government is not able to help the island restaurants in this round of funding.
    The best intentions do not always work best for everyone.
    If you are a small business owner talk to your accountant about filing for an Economic Injury Disaster loan
    These are forgivable (read free) grants of up to $10,000.00 to small business people who file a Schedule C as part of their return. There a ton of people signing up, so the money is running out fast. This might hold some people over who do not qualify for unemployment. Remember EIDL
    Everyone needs a little help in these times.

  2. Remember the prophetic words of Ronald Reagan that the scariest phrase in the English language is “I’m from the government and I’m here to help.”

    • Other prophetic words: “Any government that is big enough to give you everything you want is big enough to take everything you’ve got”.

Comments are closed.