Michele Barradas has struggled for 15 months to keep her Islip hair salon open.
Now, she said, she may have to close because she can’t get a $9,400 federal COVID-19 relief loan.
Barradas, owner and stylist at Universal Cuts Islip, said customers have been slow to return since the coronavirus restrictions were eased and she still must pay the bills. She said she needs a Paycheck Protection Program loan “to stay afloat, to keep my dream alive.”
But the PPP, which offers forgivable bank loans, is out of money.
WHAT TO KNOW
* The flagship federal aid program for small businesses stopped taking loan applications from banks May 5.
* SBA, which oversees the PPP, said the $291 billion in loan guarantees were nearly gone.
* Business owners want Congress and President Joe Biden to authorize additional guarantees to keep the program open.
* Many of the smallest businesses haven’t heard of the PPP even though it began in April 2020, experts say.
Barradas said she applied last winter for the federally guaranteed loan but was turned down by an online bank without an explanation in March. As she was preparing to apply again, she learned Washington’s flagship COVID-relief program for businesses had all but used up its $291 billion in loan guarantees.
“I need an opportunity to apply for the money again…Otherwise, I probably will end up closing,” Barradas said of her three-year-old salon. “I don’t want to feel like a failure due to COVID.”
She is among scores of small business owners on Long Island who are calling for Congress and President Joe Biden to approve the additional loan guarantees necessary to continue the PPP. The program ran out of money a couple of times last year and was restarted.
Continuing the PPP hasn’t been talked about much publicly on Capitol Hill and at the White House since the U.S. Small Business Administration, which oversees the program, announced on May 5 that it would stop accepting loan applications from banks because the guarantees had dwindled. The application window was supposed to remain open through Monday.
“The PPP needs to be extended,” said Eric Alexander, founder of the Long Island Main Street Alliance, an advocacy group for 45 downtowns that are undergoing redevelopment.
“There are still a lot of people who don’t know about the program because of language barriers or they’re not plugged into the networks” for small businesses, such as chambers of commerce, he said. “There’s a whole swath of businesses that are quasi off-the-grid, but they are open every day.”
Alexander predicted “the bottom will drop out” for some businesses if PPP loans are no longer available and they have to pay back rent for the months that they were closed last year to slow the coronavirus’ spread. A state eviction moratorium that protects many small businesses is set to expire Aug. 31.
Uniondale financial adviser Neil Seiden agreed that many small business owners are still unaware of the PPP, saying some of the people who are asking for his help are independent contractors and sole proprietors without employees who didn’t know they were eligible. Others received a first loan of up to $10 million but didn’t know they also could seek a second loan of up to $2 million, he said.
“We’ve been inundated with last-minute PPP requests, some from people who had applications with commercial banks” that couldn’t be processed, said Seiden, president of the financial advisory firm Asset Enhancement Solutions. In the past year, the company has helped to secure 1,500 PPP loans for companies and nonprofits in 34 states, totaling $160 million; it helped Long Island borrowers received 420 loans, totaling $45 million, he said.
Asset Enhancement was assisting about 100 small businesses with their PPP applications when SBA stopped accepting the forms from banks.
Asset Enhancement started contacting Community Development Financial Institutions, or CDFIs, minority-owned banks and other Community Financial Institutions – the only lenders that SBA continued to approve loans for. The institutions primarily aid small businesses that are owned by women, veterans and members of minority groups or located in poor neighborhoods.
“We’ve lined up alternative lenders and continued to help people,” said Seiden, adding he has 28 loan applications awaiting approval for a total of $10 million, with half being requested by Long Island borrowers.
One CDFI, La Fuerza Community Development Corp. in East Norwich, has received “a lot of phone calls” in the past few weeks from small businesses wanting to apply for the PPP, said executive director Giovana Bracchi, estimating a 40% increase in calls between April and May.
She said La Fuerza directed borrowers to larger CDFIs in New York City because it doesn’t meet SBA’s capital threshold to make PPP loans. Her staff helped non-English speakers to complete the loan application and distributed flyers twice a week to local merchants to raise awareness about the program.
“The PPP has helped tremendously because the loans are forgivable and a lot of small business owners cannot afford to take on more debt,” Bracchi said. “If there are still people who want to apply then there’s still the need for the program.”
More than 11.6 million PPP loans, totaling $796 billion, have been made since the program started in April 2020. About $274 billion of those were made between January and May 23, according to the most recent data from SBA.
New York State borrowers have secured about 751,650 loans, totaling $61 billion – the third-most after California and Texas. The average loan size was $81,350 in the state, compared with $68,500 nationwide.
The industry sectors with the most loan funds are construction, health care/social service, professional/technical services, leisure/hospitality and manufacturing, SBA data show. Newsday received a $10 million PPP loan in April 2020.
Orville X. Davis, CEO and co-founder of Scrap-It! Junk Removal in East Massapequa, said he was planning to apply for a second PPP loan.
He said he needs the second loan to pay the company’s 10 employees “during the slow periods” — like last year when the first loan forestalled layoffs. Also, some of the second loan would be used to purchase additional safety equipment for the workers and make improvements to sorting sites on Long Island and in Queens.
The firm’s first PPP loan was five figures and came last summer from an online lender. The two-year-old company diverts much of the junk that it hauls away to charitable donation centers and recyclers.
Asked for his reaction to news of the PPP’s end, Davis said, “I felt like I had the air ripped out of me. You think the government is going to take care of it, to help us to survive…Small businesses don’t have rainy day funds like big corporations do,” he said.
Davis wants Congress and Biden to reopen the loan program. But if that doesn’t happen, he said he has no plans to close the company that he, his wife Cynthia and three others started while studying at Farmingdale State College. Davis hopes to introduce the Scrap-It! app this summer to connect consumers with junk haulers.
Sen. Chuck Schumer (D-NY), the majority leader, “supports additional help for small businesses as well as other priorities, including more help for restaurants,” said his spokesman Angelo Roefaro. A representative of House Speaker Nancy Pelosi didn’t respond to a request for comment.
A White House official said, “We continue to have discussions with Congress about how best to build on the hundreds of billions of dollars in small business relief the [Biden] administration has already delivered.”
SBA administrator Isabella Casillas Guzman said she understands the frustration of borrowers still seeking PPP loans. She urged them to apply for other SBA financing, notably the flagship 7(a) loan program. 7(a) loans are made by banks for up to $5 million per applicant and can be used to refinance debt, buy equipment and supplies or as working capital.
In a Newsday interview in May, Guzman said the Biden administration has “seen great success in the last few months…ensuring [the PPP] reaches the smallest businesses, sole proprietorships, the self-employed and independent contractors who weren’t able to access it previously.”
Universal Cuts Islip is among the smallest businesses.
“They should open up the PPP again for the mom and pop stores like us,” Barradas said. “I feel like we’re always the ones left out.”
She said she needs a loan to pay salon manager and stylist Nicole Ciro and for rent, utilities and advertising. Some of the salon’s primary customers — senior citizens — haven’t been in for months and Barradas fears they may have died from COVID.
“I’m a struggling businesswoman who is trying to make it in this world,” she said. “Closing down would be a hard pill for me to swallow.”
Help for struggling businesses
Economic Injury Disaster Loan. SBA loans with a term of up to 30 years and interest rates of 3.75% for businesses and 2.75% for nonprofits (sba.gov/eidl)
7(a) Loan. Federally-guaranteed bank loans of up to $5 million (sba.gov/funding-programs/loans/7a-loans)
NYS COVID-19 Pandemic Small Business Recovery Grant Program. Grants of $5,000 to $50,000 to reimburse small businesses and independent arts organizations for pandemic expenses. Applications open June 10 (NYSBusinessRecovery.ny.gov)
Shuttered Venue Operators Grant Program. Grants of up to $10 million for independent movie theaters, concert halls, performing arts centers and other live entertainment venues (sba.gov/svog)
NYS Restaurant Resiliency Grant Program will distribute $25 million to restaurants that provide meals to distressed and under-represented communities. Hadn’t opened as of May 27 (NYSBusinessRecovery.ny.gov)
NYS Restaurant Return-to-Work Tax Credit will distribute $35 million in state tax credits to support restaurants. Hadn’t opened as of May 27 (NYSBusinessRecovery.ny.gov)
Farmingdale Small Business Development Center (nwsdy.li/fsbdc) serves Nassau and Suffolk counties, 934-420-2765. Satellite office in Hempstead, 516-564-8672.
Stony Brook Small Business Development Center (nwsdy.li/sbdc) at Stony Brook University, 631-632-9837. Assistance through workshops, market research, help with applications. Satellite office in Southampton, 631-632-9837
Suffolk County Community College Entrepreneurial Assistance Program in Brentwood provides training courses and seminars to those who are starting or expanding a businesses (nwsdy.li/sccctrain), 631-851-6214.
Hofstra University Business Development Center. Education and support through seminars, workshops and boot camps (nwsdy.li/hofbusiness), email@example.com, 516-463-7214.
Long Island SCORE in Hauppauge at 631-454-0771, free mentoring and workshops for entrepreneurs/small businesses owners (nwsdy.li/score)
La Fuerza Community Development Corp. (nwsdy.li/unida), 516-922-8100, provides economic growth opportunities to low-income, minority- and women-owned enterprises. Call or text 516-666-5071 or email: Covid19@Lafuerzacdc.org.
Long Island Development Corp. in Hauppauge provides low-cost loans and technical assistance to help small businesses grow (nwsdy.li/lidcorp), 516-433-5000.
PPP BY THE NUMBERS
* 11.6 million loans nationwide, totaling $796 billion, between April 3, 2020 and May 23, 2021
* 5,469 banks and other private lenders have made the loans
* NYS borrowers have secured $61 billion, the third most after California and Texas
* Construction received the most funding followed by health care/social services and professional/technical services
– Compiled by James T. Madore from SBA reports