Business owners have been waiting for Covid loans for years – and now it’s too late

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Jaja Chen and her husband Devin Li were delighted when they signed a lease for their new Bubble Tea Shop Cha Community. Both Asian-American immigrants (she from Taiwan, he from China) said it was a struggle to find authentic Asian food in their new home of Waco, Texas. So they finally decided to host a pop-up at a farmer’s market. They later moved on to a food truck. Eventually, they opened a real physical store where they could serve tea and dumplings to customers.

Chen signed the lease and boarded a plane the next day to visit his family in Taiwan. While there, she began hearing “hints of Covid”. A few months later, while the couple was back in Waco preparing for their grand opening, pandemic shutdowns ensued. Cha Community remained closed for another two months. All in all, they lost about $20,000 on the first try.

It was then that Chen decided to apply for emergency assistance through a variety of new programs offered by the US Small Business Administration. The couple applied for both a 3.75 percent fixed-rate loan under the Economic Injury Disaster Loan program and a $10,000 advance and received their application a day before it opened on March 20, 2020.

After two weeks had passed, they reported to the SBA and were told the advance was coming, Chen said. Chen said they were also approved for a $20,000 loan, but declined as the grant was said to be on the way. But more than two years later, the grant still hasn’t arrived. “To this day, we have no idea what happened,” Chen said.

She’s one of hundreds of small business owners who say they’ve waited nearly two years for help from the SBA. In a new poll released Thursday by the Small Business Majority, a national network of small businesses and community organizations, about a third of the 201 small business owners surveyed who applied for an EID loan said they never received a response or received any money to have the SBA.

And now the SBA says funding for the program is likely to expire in the next few days.

As part of the federal government’s initial response to Covid-19 and the sudden shutdown of the US economy during the first lockdown, the SBA was tasked with introducing relief for companies of all sizes. The EIDL program did exist before the pandemic, albeit on a much smaller scale (it disbursed $3.6 billion in catastrophe loans in 2018, compared to more than $369 billion in recent years).

The agency quickly ran into problems, said Brian Pifer, vice president of programs and research at the Small Business Majority. The pandemic has required “a huge increase in agency at the national level,” he said. The agency had “a capacity and staffing issue” so small businesses “just fell through the cracks.”

In a statement, the SBA did not address complaints from small business owners, who say they have never received a decision on loan or grant applications. The agency said it increased capacity to process pandemic-related EIDL loans and accelerated the speed at which application decisions would be made. The agency also said a backlog of more than 600,000 loan increase applications has been cleared.

During the pandemic, the SBA also increased the cap on EID loans, allowing businesses to apply for an increase of up to $500,000. But among respondents to the Small Business Majority survey, nearly a third of those who requested an increase said they hadn’t heard. And of that group, nearly a third said they waited more than a year.

“Although Congressional funding for the Covid-EIDL program will soon be exhausted, the SBA will continue to help our small business owners navigate this challenging transition by leveraging our existing resources,” the agency said. The agency said potential borrowers filling out applications have until May 16 to complete any documentation or signature requirements on the portal, while existing borrowers must download their files by then.

“It definitely depends on the livelihood at stake.”

What the end of the program means for applicants who have waited months and years remains unclear. But Pifer claims “there’s definitely a livelihood at stake.”

Chen eventually received a $7,500 loan under the Paycheck Protection Program, but it wasn’t enough to avoid a financial crisis. She and her husband were forced to open a line of credit with a local bank and exhaust their personal credit cards. They also had to lay off a full-time employee, which in turn slowed their business growth and strained the remaining workers.

“None of this would have happened” if we had received the scholarship, Chen said. “If we had all the different federal aid that we could have qualified for and received it on time, we wouldn’t be in debt now.”

Some applicants who had waited months or years finally got a decision.

Tabota Seyon owns InfusedLife, a vegan coffee shop and boutique in Minneapolis for women of color to sell their products. It opened doors in January 2020. When it reopened in the summer after lockdown, Seyon struggled to attract customers. The city has been rocked by protests over the killing of George Floyd by Minneapolis police. After that, thanks to the pandemic, she kept encountering obstacles: every time she or a family member fell ill with Covid-19, she had to close again.

By the end of 2020, Seyon said she had lost thousands of dollars and was even left homeless for a time. She applied for an EID loan at the end of the year but only received a decision in March 2022 – and it was a rejection based on her credit rating. Meanwhile, she had missed a rent payment and the landlord requested that she be evicted.

Other business owners have been denied more quickly, but claim they were wrongly denied and never received any feedback on their appeals. KB Brown, who owns Minneapolis-based print shop Wolfpack Promotionals, said he received a $49,000 EID loan in 2020, but that wasn’t enough. Despite the money, his business collapsed by more than 90% and he was forced to furlough all his employees. Brown’s application for a PPP loan was also denied, so he requested an increase in the EID loan after the SBA raised the cap. He hopes to get at least $100,000, he said, to keep himself afloat.

In response, the SBA said portions of its filing “call into question the validity of certain information,” according to a copy of the letter. Brown said he submitted additional evidence supporting his deal, including a letter of non-objection from the state, but the state denied the increase.

“We needed the help,” said Brown, who appealed the decision in early February and said he didn’t have an answer yet. Now Brown said he only had two employees left and one of his two embroidery machines was broken. He recently went to a bank to apply for an appliance loan so he could buy a new one – the extra EIDL money would have covered that and allowed him to hire another employee, he said.

Overall, the lack of additional funding has cost him about $70,000 in potential deals, in part because his remaining staff is stretched too thin, Brown said. He started a commercial cleaning business on the side to make extra money.

There is no clear plan to add more funds to the EIDL program, but members of Congress have called on the SBA to reallocate existing funds to partially continue it. Senators Chris Van Hollen and Ben Cardin, both Maryland Democrats, said they had written to SBA chief Isabella Casillas Guzman asking her to release money for pending motions and appeals.

“Senators urged the SBA to use its delegation authority to accommodate borrowers who wish to file an amendment, rehearing or appeal,” the May 6 statement read. “By terminating the program early, the agency appears to have prioritized its own administrative needs over those of thousands of borrowers awaiting decisions on their applications.”

Pifer, of the Small Business Majority, had said he “would like to see those dollars remain allocated to those programs to make sure the people who have been left behind and are still waiting get those dollars to them.”

For now, business owners like Seyon, Brown, and Chen had to muddle through somehow. Chen said loyal customers and supportive local organizations are the only things that keep the Cha community alive. “I’ve realized that the City of Waco, the locals, and the nonprofits have helped us more than the federal government — which is kind of unfortunate.”

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