Will Small Businesses Get $$ This Time?

New Haven’s U.S. Congresswoman and the chief of the city’s community bank Tuesday promised to help small businesses get their fair share in the newest round of federal dollars intended to keep the economy afloat amid the Covid-19 pandemic.

U.S. Rep. Rosa DeLauro made that promise, along with a withering assessment of how the first round of dollars ended up subsidizing large corporations and the wealthiest Americans, in a 45-minute virtual webinar and question-and-answer session hosted by the Greater New Haven Chamber of Commerce via the Zoom teleconferencing app.

Meanwhile, during an appearance on WNHH FM’s ​“Dateline New Haven” program, New Haven Bank CEO Maureen Frank described how her institution is hustling to cut through the bureaucracy and sputtering technology to deliver for New Haven-based small businesses.

Their respective appearances came one day after the federal Small Business Administration (SBA) opened the spigot — then closed and reopened it due to crashed computers — on $60 billion of new Paycheck Protection Program (PPP) forgivable loans specifically earmarked for community banks like Frank’s to deliver to high-risk small enterprises. After the debacle of the first round, officials from the Elicker administration (which has organized help through this ​“Together New Haven” portal) to other private and public entities are vowing to get the money where it needs to go this time.

“This Is Obscene”

DeLauro, who has represented New Haven’s Third U.S. Congressional District for three decades, laid into the myriad problems and loopholes that beset the original $349 billion federal appropriation for the PPP that Congress passed and the president signed into law at the end of March as part of the $2.2 trillion CARES Act.

She also provided an update on the $310 billion overall PPP replenishment included in the new interim coronavirus-related relief bill that Congress passed and the president signed into law at the end of last week (which includes the $60 billion earmarked to flow through community banks).

Why did Congress feel the need to pass a new small-business focused relief bill so soon after approving an initial round of support? she asked. ​“Because so many businesses, so many Connecticut businesses, faced unbelievable difficulties in accessing the program” the first time around.

DeLauro said the PPP program suffered from numerous ​“difficulties, flaws, and failures.”

Those included an initial underfunding in comparison to actual need of small businesses nationwide. The initial program provided roughly 18,500 loans worth $4.15 billion to Connecticut businesses, she said. But nationwide, the initial PPP appropriations were depleted in just 13 days, with many, many small businesses having submitted applications that have yet to be filled.

She said that large, publicly-traded businesses with expert policy and finance staff were also able to access the initial relief funds much more easily than smaller businesses less well connected to lawyers, accountants, and bankers. PPP low-interest loans are available for companies with fewer than 500 employees, and can be converted into grants if recipients spend at least 75 percent of the money received on payroll.

DeLauro said that the banks charged with distributing the initial round of PPP funds prioritized existing clients, and often existing large-scale clients. NPR reported that banks nationwide earned $10 billion in fees through their distribution of the initial PPP loans.

On top of all that, DeLauro said, also buried inside of the initial CARES Act were tax breaks for real estate investors and hedge fund managers that should result in an average of $1.6 million in savings for some of the wealthiest Americans slated to benefit—which, she said, dramatically overshadows the $1,200 direct cash assistance that low- and middle-income Americans received (or are still waiting to receive) as part of that initial relief package.

“This is obscene,” DeLauro said. ​“This has nothing to do with the coronavirus.”

“Those flaws generated a need for a second tranche of funding,” DeLauro said. And this time around, she said, Congress made sure to include a variety of provisions and set asides designed to encourage a more equitable distribution of small-business funds.

The new relief bill includes a total of roughly $310 billion for PPP. That money was made available on Monday (which also saw banks complaining about federal government website crashes because of the sudden influx of small business applications and interest.)

This second round of PPP funding sets aside $30 billion of that money for banks and credit unions with between $10 billion and $50 billion in assets, and another $30 billion for even smaller institutions with less than $10 billion in assets. She said that money has been earmarked for community development institutions, minority depository institutions, and microlenders to distribute in an effort to ensure that small, city-based, minority-owned businesses that may not have been able to access the initial round of funding get a fair shot at securing the low-interest loans-turned-grants.

It also includes $60 million in additional funding for the Economic Injury Disaster Loan (EIDL) program, as well as $75 billion for hospitals and $25 billion to expand coronavirus testing throughout the country.

More Money Coming? ​“Unequivocally, yes.”

If this new round of PPP funding runs out as quickly as the last round did, should businesses expect yet another tranche of small-business focused relief from the federal government? asked Chamber of Commerce President and CEO Garrett Sheehan (pictured).

“Unequivocally, yes,” DeLauro replied. ​“I’m hopeful that whatever the difficulties were with the system in opening this faucet, the money is now going to get out to the smallest of enterprises, the minority-owned enterprises, the women-owned businesses.”

But this money will almost certainly run out, DeLauro said, and Congress will act to provide another round of relief.

“My understanding is that if you have applied, you do not need to reapply” for PPP funds, she continued. If businesses get the ​“runaround” from banks that do not respond to their applications, she said, ​“let’s hear about it now and scream from the rooftops.” She encouraged businesses struggling to get PPP access to reach out to her office directly for help.

Sheehan reiterated concerns he has heard from local small businesses that PPP only extends through June 30. Will the federal government be providing additional relief to help businesses and workers get through the summer.

“I think that as long as we are struggling economically, you have officials that want to provide what’s needed,” DeLauro replied. ​“We want to be able to provide the help that’s needed. The resources, the money. That is our obligation.”

Sheehan said he has heard from businesses that are concerned that employees might not want to come back to work because of the $600 federal boost to weekly unemployment payments that was included in the original CARES Act. The governor’s office announced Tuesday morning that the state Labor Deployment has begun issuing the $600 supplemental stimulus payments for state unemployment benefits. Connecticut was one of the last states in the country to implement this additional unemployment relief.

“People do want to work,” DeLauro replied. ​“They do. I think people are going crazy being at home. I think people are very concerned about their economic situation.” She noted that the unemployment boost only extends through the end of July.

She stressed that this second pot of money may prove to be insufficient as well, even if it has more strings attached designed to ensure that more money gets to actual small businesses.

She called on constituents to reach out to her office and let her know directly what they need from the federal government in order to keep their businesses alive and their workers employed during this crisis.

“This is not just words on a page,” she said. ​“Our economy is in unspeakable condition at the moment. Providing relief to small businesses and their employees is critical.”

Community Bank Steps Up

New Haven Bank is working to include in this second round smaller enterprises that were too high-risk for previous loans, said CEO Maureen Frank.

“We’re doing what we’re best at,” Frank said of the community bank during an appearance Tuesday on WNHH FM’s ​“Dateline New Haven” program.

Frank’s team at the bank was able to secure emergency loans for 15 local businesses in the SBA-system-crashing first day of this second round, she reported. The bank is working with another ​“55 to 60” local applicants.

The group includes barbers and deli owners who didn’t have the paperwork or other tax or quarterly payroll preparation for loans in the first round. To help them qualify, the bank is having them produce ledgers, for instance, to document payroll.

In the frantic first round of PPP lending earlier this month, the bank was able to secure $10 million in loans for 51 New Haven-based small enterprises, Frank reported. The list includes 18 nonprofits, and eight entities previously unconnected to the bank. Among the recipients were EMERGE, LEAP, Taste of China restaurant, Campus Customs, Neighborhood Housing Services, St. Martin DePorres school, and Solar Youth.

“For a bank that has $150 million in assets, that’s a lot of money,” Frank said.

“It’s a natural flow for us” as a community bank with a charge to serve local small businesses.

In some cases, the borrowers came to New Haven Bank (formerly called Start Bank) after larger banks with which they have accounts told them they couldn’t help them because of the crushing load of applications, Frank said. ​“We were able to get the job done for them.”

The bank’s small size — it has one branch, at Whalley and Sherman; and 21 total employees — in some ways worked to its advantage. Unlike the crew at larger banks, New Haven Bank’s six staffers assigned to the PPP loans were able to be in personal contact with customers who had questions during the frustrating, confusing application process.

“We were able to pivot very quickly,” Frank said, without having to create new systems for hundreds of employees and thousands of customers to use over several states.

A listener to the program, Rodney Williams, asked Frank how many of the borrowers are black-owned businesses. She said she didn’t have an exact number, she said, because the bank by law can’t ask customers questions about race. But she said her staff is ​“reaching out” to small community enterprises that traditionally get left out of this kind of financing.

“We did the best we could do” on short notice to get federal dollars flowing into New Haven’s economy, Frank said. ​“There’s no model for this. This is unprecedented.”

Looking ahead, Frank said the bank plans to ​“work compassionately” with business borrowers to weather the Covid-19-sparked downturn. That may include, for instance, extending the 10-year terms on some loans to 20 years.

Meanwhile, staffers at the bank have all managed to avoid contracting Covid-19 so far, Frank reported. They’re rotating in two shifts, working at home and working in the office, where they have plenty of room over three floors to socially distance.

Click on the video below for the full interview with New Haven Bank CEO Maureen Frank on WNHH FM’s ​“Dateline New Haven.”