Forget “too big to fail.” There are businesses in America that might be too small to survive the pandemic.
The coronavirus has been a catastrophe for companies across the country, but the government’s small business loan program was supposed to help keep them afloat. For millions of entrepreneurs — those once hopeful and inspired enough to earn their living from small storefronts, restaurants, salons — the dream was to create a business that would sustain their families and help build communities. But for many of them, the end is in sight as the pandemic continues, and relief programs have failed to come to their aid, like rescue planes too full and far up to see all the people still drowning.
And while these small businesses are hanging on for dear life, investors are pushing up stock prices of large public companies, padding the wealth of America’s billionaires. The important question now is: How should the federal government and banks provide additional relief before Main Street goes out of business entirely?
The Small Business Association’s Paycheck Protection Program — the main lifeline to the country’s 30.7 million small businesses in the CARES Act — is a loan program that was only ever intended to be a short-term solution. The PPP is a low-interest loan to encourage small businesses to keep workers on their payrolls as unemployment soars nationwide during the coronavirus pandemic. The broad rule (there are many) is that if recipients use at least 60% to keep people employed at their regular salaries over the next few months, the loan would be forgiven.
But we are now weeks away from potential armageddon.
“Ultimately the PPP is still a short-term solution to a long-term problem. We are headed toward a financial cliff, and the urgency for a long-term solution is paramount,” said Sarah Crozier, a spokesperson for the Main Street Alliance Action Fund.
Part of the problem for many small businesses is that the rules are incredibly complicated, especially if you don’t have the resources to guide you through first the application and then how to get the loan forgiven.
The initial $349 billion in PPP funds was quickly spent, leaving out millions of the country’s most vulnerable businesses which didn’t have accounting teams to swiftly handle the paperwork (you can see the PPP application here) and which also weren’t priorities for banks helping larger clients (companies with as many as 500 employees were eligible). A second round of funding was then passed by Congress, but PPP’s imperfections surfaced with time: Some recipients found the ever-shifting terms for loan forgiveness impossible to satisfy (namely, using a loan to keep people on payroll during lockdown) and started giving back the money. And those who spent their PPP money now face the reality that the loan was not enough to carry them through a seemingly endless health crisis.
Banks have approved some 4.9 million SBA loans so far to small businesses (and some not-so-small like Kanye West’s Yeezy, Kushner family companies, and the Catholic Church). Despite this breadth, to say that Main Street is crumbling is not an overstatement. An estimated 100,000 small businesses were closed permanently by mid-May; in a large Yelp survey, half of the restaurants that were closed due to COVID-19 won’t reopen. In Brooklyn, half of small business owners recently told the Chamber of Commerce they would struggle to stay open for the next three months.
For those whose PPP loan applications were denied, the remaining options are few and the clock is running down. Struggling companies continue to look for aid, even though $132 billion from the second round of PPP remained unused by early July (so the SBA extended the application deadline to Aug. 8). The SBA did not respond to an inquiry about how many applications were denied, but one poll found that the overall PPP rejection rate was 30% and was even higher for minority-owned businesses. This has only served to exacerbate the inequalities faced by those who don’t have access to accounting teams and concierge banking services.
BuzzFeed News spoke to small business owners around the country whose PPP loan applications were either denied or who have yet to hear from their banks. They talked about the reasons they were ineligible (for instance, not being profitable in 2019, not having the required payroll documentation, or simply not filling out the forms correctly), how difficult the last few months have been, and the limited options they have left. All the interviews have been edited for length and clarity.
OKC Black Eats, a marketing and consulting firm for Black-owned restaurants in Oklahoma City
I applied for PPP in the beginning and it was confusing. They kept changing the process. I didn’t get an email confirmation; they tell you to write this [confirmation] number down, but I didn’t because I was expecting email confirmation. So I submitted a second application, and then I get an email several weeks later that they got a duplicate application and they would delete one of them. And then I got denied.
PPP is not a program suited for a startup business. I started OKC Black Eats, a marketing and consulting company, as a hobby in 2016 and incorporated in 2018. My first year of full-time entrepreneurship was in 2019, when I left corporate America, and I filed a loss. Because I showed a loss on my Schedule C, I was automatically disqualified — I found that out from my banking friends.
My office landlord has offered some flexible terms, like deferment or breaking up payments. But I haven’t heard of anyone lowering the rent.
I was frustrated because in my city and in my state, there is no support and intentionality to support Black-owned businesses. And I understand people being frustrated about larger companies receiving PPP loans. The disadvantage of being a small business is you don’t have a team of accountants and payroll people who could put together this application in hours. As much as PPP attempted to help Main Street local businesses, they didn’t consider that there needs to be a level of local support, and an allocation for smaller, black- and minority-owned businesses who will need more time.
I manage a black professionals group here and sit on some boards, and we said there’s not information being sent out to inform black-owned businesses in a timely manner, so we just started creating a digital resource list on grants and information on PPP. In the black community, financial redlining has always been an issue, so we’ve also been encouraging people — apply, don’t self-disqualify — to help people get over their mental roadblocks.
But I also wonder about the banking industry — if you take this loan out [and it’s not forgiven] and you can’t pay it back. What’s the impact on the bank, and what’s the impact on the individual? A lot of things are up in the air. COVID exposed underlying conditions. This has exposed how weak our economy is.
The question for our local business is: How do you prepare, knowing this pandemic and recession can last 18 months? And politicians can’t approach this pandemic with solutions thinking of how our more successful and adaptable businesses can survive, because that eliminates a whole segment of the population, from startups to black- and minority-owned businesses, women-owned businesses, and people who leaped out right before all this started.
Naive Melody Vintage, a vintage furniture, housewares, antiques, art, and clothing store in Oregon City, Oregon
I have $125,000 in student loan debt. I didn’t anticipate becoming a small business owner. I was in the nonprofit sector for the last nine years. But there were funding issues and I was laid off in November of 2019.
I had been a vintage collector for many years, and my husband was as well. So I had this wild idea to become a small business owner. We used savings, a small loan, and put our personal belongings into the store. We opened the week before Thanksgiving and only had about six weeks of being open in 2019. We took a significant loss last year and I have yet to receive a paycheck from my store.
When info about PPP and EIDL (Economic Injury Disaster Loan) programs came out, at first we were like, Yeah, this is so exciting! This is going to be great and this will carry us through. Pretty quickly, after talking to our tax preparer, we knew we weren’t even [eligible]. I am a sole proprietor. The basic qualification for PPP is you have to have employees and we do not have any employees and we had no taxable profit last year. All the money I put in personally and all the product I invested in didn’t account for anything.
PPP is only a small part of it though — [the government’s response] it’s fully dysfunctional, in all ways. No one could anticipate the horrible way the administration has dealt with this. There’s no clear plan for how to get out of this. We were all anticipating — looking at our federal government and elected officials — this would only be three months. Well, that’s clearly not the case.
We were closed and had some one-on-one private shopping appointments and sales. We have an online presence that is pretty, but not a vehicle for robust online shopping. In April we made $200. My monthly fixed costs are about $2,500. I would love to say utility companies forgiving and understanding but they’re not, and we’re paying for rent. And we have to buy product to keep the store stocked.
On June 2, we reopened. On day one, I was really scared. I didn’t know how to deal with people. I feel angry when people come to my shop and don’t want to wear a mask, and leave when I ask them to wear a mask. We did alright in June, but in July, we’re seeing a real tapering off. People are seeing the spike and are scared so sales are way down.
There’s this whole idea that if we open the economy back up, people will just come out and spend money. But when you still have a stay-at-home order or a social distancing order and there are people with health problems, how do we ask them to put themselves and their loved ones at risk to support local businesses? People are not ready to spend money.
There’s not a lot of support for small businesses from the government to make the healthy decision; we’re almost being forced to put the economy over the health and well-being of our family and community because the support is not there.
My husband and I love what we do, and it’s fun. It should have been more fun than working a high-level nonprofit job. Some days I just cry because I don't know what is going to happen. Some days I am inspired because people really enjoy the shop. I still love people and old weird stuff — that’s my jam. But at some point, the fear is just a lot.
Barboza Excavating and Landscaping in New Bedford, Massachusetts
I have about 30 years experience in this line of work and we’ve been in business for about five years. We did residential homes, new construction of homes, building of water treatment plants, schools, baseball and football fields. We had about five employees, but we got hit pretty good with this pandemic. It’s put us at a standstill.
I contacted the SBA here; I can’t say they were very helpful. They said just go to your local bank. I did that. But I haven’t heard anything back yet. They were all closed up so I did [the PPP application] online in May. I am not sure what’s going on. Have they seen it? Have they processed it? Is it at the bottom of a stack of papers somewhere? Is it in the trash can? I don’t know.
I think minority-owned businesses got hit the worst. I think our counterparts were more successful in applying for and obtaining grants and loans. There are people in the area talking about it through the grapevine: Did you hear about this company? They’re doing this and doing that. If you don’t have someone fighting on your behalf, you don’t get anywhere.
My five employees — work dried up and I couldn’t keep them on without any kind of funding, so I had to let them go. We were very close and had good working relationships and friendships. It was horrible — again, they were not only employees, but friends with families and responsibilities. It was very difficult. Some have been able to move on to other jobs and some are still out of work.
I am going about this basically on my own. I am not getting any direction from anywhere. It was suggested I try other banks. But I haven’t done that yet; the thing is, when I applied at my own bank and I didn’t hear anything back, I got discouraged. And I’ve been banking with them for about four years.
I still have a commercial garage that I store things in, and some utility bills. It’s about $1,500 to $2,000 a month. I was able to work something out with my landlord — we pushed it back, but they want their money. I have a little debt from the company too, not much — I purchased a truck and a piece of equipment — but they [the lender] are another one that wants their money. They will work with you, until a certain point. We’re between a rock and a hard place.
If something doesn’t happen soon, my business will be forced to close. By September, October, everything will be dried up, depleted. It would be very sad and difficult, but there’s not going to be much I am going to be able to do.
Jeanine Schappert Longo
O’beehave Naturals, a bottle-free beauty product supplier in Babylon, New York
I’ve been self-employed for over 20 years. I’ve had multiple salons and I built my own brand. My most recent venture was developing a refill project to move toward more sustainable means of distribution in my [the salon] industry. I operate a small brick-and-mortar, and my hair business shut down completely [during the pandemic] so my business shifted to online delivery. My friends said, Don’t you dare; don’t you give up that quick, and it helps you see some light at the end of the tunnel. I’m a single mom, so I went into doing what I do: Figuring it out.
I applied for a PPP loan, but the time spent on that application was time I needed to spend on my customer base. I There are people who are way more efficient than I. My best friend is always like, You lack executive function. But I gave it the time I was able to. I was denied because I had answered a question incorrectly; they sent back some paperwork saying you didn’t answer XYZ question. I just stopped playing the game there. I couldn’t call anybody. I couldn’t get anyone on the phone to help me with my application — places that I’ve banked with for years. Because of that, I wouldn’t feel comfortable taking the money anyhow.
I told Capital One, go fuck yourself; I told Square, I don’t want your fucking money. When I cool down I might change my mind. But everything was so fresh and new and I was not about to get into a financial fucking contract with somebody. I hope America will prove me wrong and take the reins back and do better than the private sector banks are doing because they are doing a shitshow job.
And I don’t want your fucking teet! I don’t need your fucking teet. Only for the government to decide those people, that they’re trying so desperately to get on their fucking teet, they’re going to call them a piece of shit anyway. We’ve already been down that road.
I have been taking the bare, bare, bare minimum to support myself and my son and I pay my taxes, I have almost perfect credit. When they say 99% of small businesses fail, that’s not because there's not heart behind it; it’s because [in] the financial sector, if you don’t come from money and have expertise and complete understanding in the financial systems, you are getting fucking buried. Guess who benefits: lawyers and banks. It’s unscrupulous and it’s not the way to have a healthy society. I have paid business protection insurance for 21 years. When I wrote them a letter about having to shut down, I was told, Sorry, you don’t get any money because you don’t have “pandemic” written in your policy. So I have paid close to $100,000 into an insurance fund that gave me not one red cent. When we don’t protect people, we fall as a nation, which I think we see very clearly now.
My landlord said he got millions in PPP money and referred me to their banker, but their banker never called me back. I am nothing to them. They are only interested in giving their money to places where they’ll get a return on it. This is not new; we’re just a big fucking ATM machine. I don’t want to be patronized. We support ourselves and our community supports us.
There’s a bunch of bullshit all over the private sector and banking — things that I find unfair, unscrupulous, not weighted in our favor. The financial world is such a rodeo and if you’re not watching every detail, it is set up for people to fail. I’ve reached out to banks and the SBA for over a decade, saying: We are a female-founded business; we’re sustainability-focused; it’s a new model; there’s nothing like it out there — is there anyone who will take my loan, with interest reaching 11%, and help transfer it to something lower? Nobody fucking calls you back. There’s only so much time you can spend on that when you have other things you can be doing that are fruitful.
Wilson Ellis Company, a corporate training company. She is based in Lubbock, Texas.
We’re a consulting and training company and we started the company 2001. Back in April, what Bank of America did, you’d be on their website and it takes you to a third-party called Intralinks, where you have instructions to complete the PPP loan application. I felt like I was taking the GRE, or the LSAT. I submitted it and I wasn’t sure — Are they reading it? Is it correct? What’s going on? I was looking at my email and all I got was an obscure response. A few weeks later, I started worrying because I hadn't heard anything and I was trying to get a hold of someone at Bank of America and they told me to contact Intralinks. It was astounding. They didn’t answer any questions because they said they do not have access to the document. I called them five to eight times. I’m just like, Can I speak to someone who can look at my document and tell me why I haven’t heard anything? No, we can’t do that. We’re going to connect you to Bank of America. And then you go through the cycle of hell and they hang up on you.
I go down to my branch and say I am closing my account. They’re like, Oh, I’m so sorry, let me get my manager. Eventually someone calls me and is able to pull up my application and sees I filled out something wrong. I had put down that I had a felony, which I don’t. So that had to be changed in an addendum.
Meanwhile, I get a letter in the mail that I have been denied. But I don’t know if it’s from the first time or the second time after I fixed it. So I try to call back, but he stopped picking up my calls and it goes straight to voicemail now. I’m like, screw it, I don’t want to deal with these people anymore. This has been such a pain in the ass and so impossible.
The thing is this is a legitimate company, in business since 2001. And we are a training company; we have been hit hard by COVID. This is real. This is not Kanye.
So I closed my Bank of America accounts over the phone. My new bank isn’t giving out PPP loans anymore — if I had been with them from the beginning I probably would have gotten it, easily. They told me some other bank somewhere down the street still is, but is that what I’m supposed to do, get a PPP loan from some random bank?
We haven't been destitute, but the PPP loan would have helped us and given us a cushion. At this point, I don’t want the hassle and I don’t trust it. My trust in the government is so low right now. I don’t trust anything they say. It’s weird because I’m not normally like that — I’ve never felt the government is somehow grifting all of us. PPP was a good idea. But does Jared Kushner need money? The answer is no, he doesn't need a loan. And I’ll be damned, if his loan is forgiven, and Kanye’s too, I will feel like hitting the streets in protest.
Devin James Fry
The Sharpist, a mobile sharpening service for medical facilities, restaurants, and consumers in Denver
I have one employee, and it’s me. I started this business — a mobile sharpening service — in 2009. I do surgical instruments and some restaurant work.
With a micro operation, such as mine, I have really always done my own accounting and taxes because it’s straightforward enough. While I am capable enough with numbers to do basic accounting in my day to day business, I didn’t have the know-how to get together the paperwork and everything needed for the PPP loan application.
What’s held me back is not being properly CPA’d up and banked up. I think that’s a big reason bigger companies got these PPP loans and little guys like me didn’t: because we don’t have the financial know-how. Maybe in these folks’ eyes, a small business is anyone with less than 500 employees. That’s a massive business! Even a business with 10 employees is 10 times as big as mine. Folks with micro businesses like mine are not being helped. I’m part of small business groups and the most common refrain is, I didn’t get mine. Did anyone get theirs? No one got it.
I use USAA. But I found out to my surprise that USAA is not a PPP lender. I had to really quickly try to establish a relationship with a bank that was a PPP lender, but that didn’t work well. The banks were flooded with loan requests from their established clients. They weren’t in a moment when they couldn’t take on new clients and take me seriously.
I tried three banks here in Denver. One said they didn’t have the bandwidth to help me. One ultimately said the same thing, that we don’t anticipate we can get to your application within the time window. The third sent was clearly trying to pivot and think on their feet because the PPP guidelines kept changing.
I filled out the application, but you have to show payroll numbers in a specific way. I am a one-person business. I have never done it that way. I just have money in my business account and I use it. I wrote a cover letter explaining my situation. The response was, You didn't show payroll correctly, so we can’t give you a loan; you can’t prove you have payroll that has taken a hit during the pandemic. It just feels very convoluted. I also took a loss last year because I bought a new van and some sharpening equipment. So, because I am someone who has taken all my profit and put it back into the business to grow business, that makes me ineligible for assistance? You’d think someone responsibly going about growing their business should be the kind of person getting help.
My biggest bill is my vehicle, a 2018 Dodge van that I use as a mobile workshop — I’m paying that off $600 monthly. USAA gave me two months forbearance [on the auto loan], which is nice but it doesn't go very far. And I work at farmers markets on weekends: One is about $6,000 for the season, and the other is about $4,000 for the season, which is from May to October. They had to push back the opening date due to the pandemic, but they definitely didn’t make entry fee any less for that reason.
At the moment, I am not in danger of closing. But it’s like, you can’t crush dirt — I am such a small operation. I will find a way to survive because I am just supporting myself. When everything locked down, certain parts of my business weren’t doable anymore. Clinics shut down, plastic surgery centers, veterinary clinics. So my business shifted away from medical and restaurant to residential. I was really lucky I was able to do that. I am doing fine, but it’s only through a ton of legwork and the sheer flexibility of my line of work. There are so many avenues for sharpening work. It would have been a lot less stressful if I had some support from our government.
Habitot Children's Museum in Berkeley, California
We are a small nonprofit and that has presented a number of issues. We have a small budget. Because the PPP loan goes through normal lending circles, there is a bias in favor of more established, higher-income businesses or nonprofits because banks see that as a better loaning partner. The smaller you are, the more they’re like, Oh, are they really going to pay us back? So you can be in business for 22 years like we have, but that’s not going to count for much to a banking officer looking at your cash flow and your asset base, which is not huge for us. We’re in business and we pay our bills, but we’re never going to look great on paper. In this moment, with so many nonprofits and small businesses really struggling, we’re the ones who really need some forgiveness about the smallness.
We applied in the last round and didn’t get it, so we applied again when they extended the deadline to Aug. 8. But I haven’t heard anything. So I called and they said, We are still reviewing your materials. And I think it’s because on paper, we’re not an easy call for them.
The other aspect is being a nonprofit. You get to a part in the application that asks, who is the owner. We don’t have an owner. I had to personally put my social security in and my name — which makes me uncomfortable — but I put down that I own 0%. The formulas they’re using are for businesses, not nonprofits. There needs to be a section that says, “If you’re a nonprofit, go to this section,” and there are different questions.
I know some other children’s museums have gotten PPP loans, and they are bigger than us. It sounds like if you find the right banking partner and are big enough, you’ll get one. But if you’re a smaller business or a nonprofit, some of these things are stacked against them.
We had nine full-time employee equivalents (FTEs) spread among 20 employees; some were part-timers. Now we have 1.1 FTE people still hanging on. I would have to hire seven people now to meet the requirements for how PPP forgiveness is structured. That is crazy, because that is not enough money for me to hire them for any length of time. I’d get the money, spend it on eight employees for a month and a half and then lay them off again. There are crazy restrictions for what you can do with the money. I wish there was a little more freedom on how we use that money. It would put it in our own hands to figure out how to keep our businesses afloat.
We have 50,000 to 60,000 visitors each year, but the space is only about 4,000 square feet. The main part of the museum, you can’t socially distance in that space.
With things stacked against us, many children’s museums are choosing long-term closure until we can get to a vaccine or treatments. Museums that reopened are finding that they have to close again with cases spiking. Those of us with our eyes open are going along with the plan to contain the virus so we get to a point where we can reopen. But — when reopenings happen when people don’t wear masks and you don’t have good contact tracing and you don’t have sufficient testing in place — until we bring up our game, we’re ahead of ourselves in trying to reopen. We can’t keep our visitors or our staff safe now. And we’re about children’s health and well-being. We have grandparents who bring their children here, and immunocompromised children and special needs children. I think we’re doing the responsible thing by recognizing that being open is not a viable option.
Small businesses are the bedrock of this country, and everyone talks about that, but when it comes down to it, there’s not a lot of support for small businesses compared to subsidies for the oil companies or big bank bailouts.
Some businesses are never going to come back. Museums all rely on visitation, and it won't be possible to provide that environment without some serious modifications. Habitot’s not going out of business; we’re still staying vital on social media and online, and providing learning materials to the community. We’re at least a year away from that being another conversation.