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April 22, 2020 By Christian Murray
A federal loan program designed to help small businesses stay afloat is likely to get a $310 billion injection in cash in coming days—but critics argue that it will not do much to save Queens businesses.
The Payment Protection Program, which essentially provides business owners with a forgivable loan equivalent to 2 1/2 months of payroll, was launched on April 3 and only a limited number of businesses in Queens were able to tap into the program.
The program, which was funded to the tune of $349 billion, ran out of cash within two weeks, before many small and micro businesses got their paperwork in order to apply.
“To date, I have not spoken to a single small business that has gotten a single cent from the Payment Protection Program,” said Tom Grech, the president and CEO of the Queens Chamber of Commerce on Wednesday. “This is unacceptable.”
Congress is likely to allocate $310 billion to restart the program this week—a figure Grech said is not going to be enough.
“The sheer volume of businesses in the United States vying for these funds doesn’t make it look all that promising,” Grech said. “I don’t see the government being able to get the right amount of money in the rights hands.”
The program, which caters to firms with as many as 500 employees, has been criticized for favoring larger companies. The larger firms have staff to decipher the program requirements; existing relationships with banks; and better accounting systems so they can quickly submit the right documents.
“Companies with 50 or fewer employees have been ignored so far,” Grech said. “They are getting hammered and they are most in danger.”
Grech said that as many as 50 percent of the bars and restaurants in Queens may not reopen.
PPP Not Designed with Queens in Mind
The Payment Protection Program, while being presented as a life line to small businesses, is not designed with a lot of Queens businesses in mind and would provide little help to many even if the program had unlimited funds.
The allure of the program is that it lends businesses the equivalent of 250 percent of their average monthly payroll—a sum doesn’t have to be paid back.
Businesses, however, must provide detailed paperwork– quantifying what their average monthly payroll is.
But in Queens many businesses are immigrant owned and operated by family members who don’t regularly pay themselves–and don’t have a set payroll. Additionally, many of their employees are paid cash.
Jaime-Faye Bean, director of Sunnyside Shines Business Improvement District, said some family-owned business she has dealt with don’t have a payroll at all. Many owners, she said, just pay themselves from time to time whenever they need to pay bills.
Therefore, many businesses are unable to come up with the paperwork to even apply for the PPP loan.
Additionally, for the loan to be fully forgiven, 75 percent of the funds must be spent on payroll. The remainder can go on rent, utilities and similar items.
In Queens, the biggest expense for many small businesses is rent—something that the program does not specifically address.
“The very small businesses are most concerned about covering rent,” Bean said. “If you don’t have a lot of staff, rent is your big issue. And rent is always a big cost in Queens and New York City.”
Bean said the program is not a good fit for many Queens businesses.
“The program is not designed for our community,” Bean said. “Our businesses are not in office parks in middle of America.”
In addition, the PPP funds that will be forgiven must be used within eight weeks of the loan being disbursed.
Many businesses—such as bars and restaurants– in New York are likely to still be shut or their operations scaled back to ensure social distancing. Therefore, some may not need a full staff.
Furthermore, many business owners may not want to keep or rehire workers knowing that they will have to let them go after the eight-week grant period ends–because business has not bounced back.
Economic Injury Disaster Loan Program
The federal government rolled out two programs for small businesses after the COVID-19 breakout. There was the PPP as well as the Economic Injury Disaster Loan program, a program that provided $10,000 grants and low-interest loans up to $2 million.
The EIDL program ran out of funds too as businesses clamored to get the $10,000 grant, which could be used to pay all immediate expenses. The stimulus dedicated $10 billion toward the grant component of the EIDL program.
Congress is expected to allocate another $10 billion toward the grant component of the program this week, which is expected to be snapped up fast. There will be additional funds added for the low-interest loans.
But the program’s main attraction is the grant, since many small and micro businesses are reluctant to take on debt despite the favorable terms.
“Many don’t want to take on debt if they are unsure whether their business will survive,” Bean said.
Uncertain Future
Bean estimates that as many of a quarter of the borough’s businesses may not recover. She said that the closure of these business will have a profound effect on the borough.
She said that the businesses most at risk are the ones that have close ties to their community. They are owned by “community people” as opposed to large corporations.
She said that it could do significant damage to the immigrant experience and the concept of the American Dream.
Many immigrants come to Queens, she said, establish small businesses that are the foundation for their families to move ahead.
“This pathway for many immigrants could be decimated—which would be tragic.”
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6 Comments
Anonymouse, Despite what AOC put out in her statement, any business owner knows you have to provide your business’ financial data to get a loan. If mom and pops are paying employees off the books, they are not withholding taxes and paying their payroll taxes for these employees.
If AOC had read and understood the bill, she would have seen that there was funding for hospitals and testing. As for rent regulations, they are regulated by state law, not the federal government. If she thinks the rest of the country should pay for people’s rents and mortgages, she is delusional.
The sad reality is that many businesses, both mom and pops and larger ones, won’t be able to survive, just as in the Great Depression.
@Gardens Watcher
Did you not read the article? The bill does little for small ‘mom and pop’ businesses, like most in Queens. That’s why AOC opposed it. Thanx
“On behalf of my constituents in the Bronx and Queens, New York’s 14th congressional district, the most impacted district in America…it is a joke when Republicans say that they have urgency around this bill,” Ocasio-Cortez said. “The only folks they have urgency around are folks like Ruth’s Chris Steak House and Shake Shack. Those are the people getting assistance in this bill. You are not trying to fix this bill for mom and pops.”
“We have to fight to fund hospitals, fighting to fund testing. That is what we’re fighting for in this bill,” she said. “It is unconscionable. If you had urgency, you would legislate like rent was due on May 1 and make sure we include rent and mortgage relief for our constituents.”
AOC was the ONLY Democrat in both the House and the Senate to vote against the latest $484 Billion relief bill. WTF is wrong with her??
Vote her OUT in the June Democratic primary. She is a destructive joke.
Sadly many of our small shops won’t come back and there will be more empty storefronts.more graffiti and more crime. Every frigen store that is closed has graffiti all over the doors its sickening. I hope TPTB can figure out a way to help these store owners that don’t match the specific requirements.
Not to mention that most of kids dropped out due to financial difficulties. Any guidance of saving this over 10 years music school will be greatly appreciated. Please let us know if you hear any arts organization grants or any funds might be available for us.
? hello, I own a music school called Queens Music Academy. We are located in Woodside and Sunnyside. We serve about 270 children in our community since 2009 and most of them are young and beginners , therefore online lessons were not suitable for them. Most of our students stopped taking lessons since March. However, we are still in due to pay rent. And we aren’t quality for PPP loan nor EIDL loans since all our teachers are independent contractors. Our landlords are forcing us to pay rent and our teachers are struggling from their landlords. Is there any help available for us?