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Why is it so difficult for small businesses to get federal pandemic aid?

Demand remains high for relief the federal Paycheck Protection Program is making available for smaller businesses. But the distribution of that money continues to be a source of controversy, and the program has been mired with technical problems. Lisa Desjardins reports and talks to the Main Street Alliance's Amanda Ballantyne and Brad Close of the National Federation of Independent Businesses.

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  • Judy Woodruff:

    It is not a surprise, but the demand for loans and grants for smaller businesses made available through the federal Paycheck Protection Program remains extremely high.

    Even so, as President Trump touted the program today, much of the distribution of that money has stirred up anger.

    And, as Lisa Desjardins tells us, the rollout of the program continues to have its share of troubles.

  • Lisa Desjardins:

    Judy, yesterday was the opening of a second round of applications for the money. But it was marred by glitches, delays and missed opportunities.

    The first batch of funds was used up in just two weeks. Now, some of the money went to larger companies, even though the intent was to help smaller and medium-sized businesses.

    We checked back with several business owners who were having trouble getting these loans through the Paycheck Protection Program. We wanted to find out if anything has changed.

  • Jennifer Myers-Pulidore:

    I am Jennifer Myers-Pulidore. And I'm the owner of Myers of Keswick. It is located in Greenwich Village in New York City. It is a specialty British food store.

    I didn't get the loan the first round and was told to apply again in the second round, which I did on Friday.

  • Justin Moore:

    My name is Justin Moore. I am the general manager of Uncle Bobbie's Coffee & Books in Philadelphia.

    We were one of the lucky ones that were able to get our applications in and approved during that first round of funding, and we actually received our funds late last week.

  • Christine Goslin:

    My name is Chris Goslin, and I have a small hair salon located in Noank, Connecticut.

    I have applied to three different lenders, and my expectation is that I won't be approved, that maybe nobody will see my application. But I'm giving it another shot.

  • Greg Hunnicutt:

    My name is Greg Hunnicutt. Our company is here in Houston, Texas. It's Hunnicutt Construction & Design.

    We applied for the first round and got nothing. I feel like it's been kind of a mess, and that I think that leads to a little bit more anxiety for small business owners like me.

  • Justin Moore:

    Now that we have received the money, what can we do with it? That's really been our issue.

    They say basically 25 percent of the money you receive can go towards non-payroll costs. The problem with that is, there's only a small list of categories that that could fall into. It's rent, it's utilities, and interest on certain things.

    With us being closed, our utilities may be $100 for the next eight weeks, because we're not using any of it. But we have other bills, like our insurance premiums, our security, monthly expenses that don't necessarily fall in as an eligible expense. So, we have to make the choices. Do we pay this money?

  • Christine Goslin:

    I am so frustrated that businesses who were out there in the stock market, they were trading publicly, companies that their CEOs are making more money than I will probably ever see in my lifetime, took advantage of a program that was designed to help people like me, people who need the money so that we can survive and so that, next week, when our taxes are due and our rent is due, that we won't have to worry what we have to pay first.

  • Greg Hunnicutt:

    I don't have much hope. We did apply, you know, with multiple banks. But I — we're making a plan to go on without it.

  • Lisa Desjardins:

    While the release of the latest relief money was bogged down, some larger companies, as you heard, like Shake Shack and some large hotel companies, have returned the loans they got.

    More than $2 billion was returned from companies after public outcry. All told, the government has committed roughly $650 billion for this program so far.

    We turn to two leaders who advocate for small and independent businesses.

    Amanda Ballantyne is executive director of the Main Street Alliance. And Brad Close, he's president of the National Federation of Independent Businesses.

    Brad, let's start with you.

    First of all, what exactly have been the problems in the last day-and-a-half, as thousands of businesses were waiting for this money?

  • Brad Close:

    Yes. Thanks.

    I think biggest problems we hear from small businesses is that they're having a hard time getting to their bank to get their applications in. They have been very frustrated at the delays. They keep reading media reports of publicly traded companies accessing significant amounts of money.

    And when you look at the size of money going to large businesses and publicly traded, that money would fund tens of thousands of small businesses to help them keep their employees on the payroll.

    So, those that haven't gotten loans, which is about 80 percent of small businesses who have applied right now, are very frustrated.

  • Lisa Desjardins:

    Amanda, my understanding that is the Small Business Administration was trying to gear this, tried to make changes to make this more accessible to small banks.

    But, from what you understand, what kind of businesses actually are getting this help most, and where is this money missing the mark?

  • Amanda Ballantyne:

    In the most recent legislation that put more money into this program, there was special money that was to be earmarked for smaller, mid-sized banks, credit unions, and community financial development institutions that are really designed to work with underbanked and unbanked business populations around the country.

    So, in some ways, that's a very good development in this program. But the programs and those banks are still having trouble and struggling processing the applications that are coming in.

    And I would say the new computer system that SBA put in place to try and process the backlog — because, remember, they paused the program last week, so there's this tremendous backlog — has also led to disparities in terms of who is getting access.

    I still think they're processing the backlog from the last program, and I think it's unlikely that businesses who were turned away or failed to get in line in the last round of this are going to see loans come through.

  • Lisa Desjardins:

    We have heard a lot of that frustration, and, as you talked about, Brad, frustration over those larger companies getting the money.

    But this was supposed to be — the law says it's for companies with fewer than 500 workers. How exactly are these national giant companies getting this money to begin with?

  • Brad Close:

    Well, that's a good question.

    I think they have very good banking relationships, and probably — this seems to be coming mostly from large national banks, large regional banks, that are reaching out to probably their best customers and getting them these loans.

    When you read that the Los Angeles Lakers, professional basketball team, got almost $5 million, that definitely has us concerned.

    There are tweaks, though, that Congress can make to this program right now that would make it a lot better and would prevent some of these things from happening.

    One of the biggest concerns we hear from small businesses is the requirement that 75 percent of the loan proceeds be used for payroll and benefit costs. That's a huge threshold for businesses that have two, four, six, eight employees. Their employee costs aren't that high.

  • Lisa Desjardins:

    You know, that's what I want to talk about more.

    Amanda, we heard just in that story, some businesses, especially restaurants, in some cases, day care, say that this program really is not helping them, for different reasons.

    Can you explain why that is? Some businesses meeting their payroll is not exactly what they need to keep open.

  • Amanda Ballantyne:

    Sure.

    And I think — remember, this program was designed initially before we had these tremendous waves of layoffs. So, many businesses have already done significant — I mean, stunning layoffs and are — in fact, many of them are applying for unemployment themselves.

    What they need is to keep the doors open, keep fixed costs flowing, paying their rent, paying their utilities, their mortgages, so that they can continue to remain solvent and avoid the type of debt that would push them into bankruptcy.

    It's also true that businesses need money right now to pivot, to rehire, so that they can shift their operations and operate in the ways that they are able to in a somewhat limited environment.

    And so the PPP, you know, the ratios are incorrect, that's true. It could be made more flexible, and also be pivoted to make it easier for businesses to start to figure out how to open up and to retrofit to do so.

  • Lisa Desjardins:

    I know some businesses are worried about when they can get their revenue back.

    But, Brad, I want to ask you, finally, I have heard from businesses who have waited for this money, and now say they have run out of time, and they are beginning to think about layoffs, maybe as soon as tomorrow, if a loan doesn't come through.

    How many of your members are in that situation, where they may be laying off workers right now?

  • Brad Close:

    Well, when we asked our members three weeks ago, 50 percent of them said that they couldn't make it more than one to two months under the current economic conditions.

    So, if they're not getting access to a loan program or a grant program, that's a problem. And that's why these programs have got to be fixed to work for the smallest of businesses. The SBA needs the take that money that publicly traded companies are returning and keep it in the pool and get it out to the very small business owners out there.

    We're concerned that there's just not many options there for small business owners. And I know the Fed has announced their Main Street program, but, when they announced it, they said it would have a minimum loan floor of $2 million, which is ludicrous for small businesses.

    They need to have that loan floor very, very small, so a typical small business has another place to go for help.

  • Lisa Desjardins:

    And we know small business, a reminder, they are so key to our economy.

    Brad Close, Amanda Ballantyne, thank you.

  • Amanda Ballantyne:

    Thank you.

  • Brad Close:

    Thank you.

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