Small business owners in New Jersey and other regions hit hard by the COVID-19 outbreak are struggling to stay afloat despite a nearly $350 billion lifeline from the federal government.
More money is likely in the offing, but the first wave of funding under the Paycheck Protection Program — part of the CARES Act passed by Congress last month to provide relief during the pandemic for individuals, business and governments — ran out in about two weeks. The taxpayer-funded program, intended for businesses with 500 or less employees, turns federal Small Business Administration loans into grants if companies keep their workers on.
Amid massive demand for the funding, there were also questions about how the program was being administered as chains like Shake Shack and Ruth’s Chris Steakhouse secured millions in loans, while many truly small companies who sought relief got tangled in red tape. Shake Shack has since returned its $10 million award.
Raul Menares is among them. He said he applied for a $70,000 loan under PPP for his Hoboken- and Westfield-based RAM Design Builders, which has 14 full-time employees. He said he had to jump through hoops just to get his application considered by a bank he’s been doing business with for almost 20 years.
“I remember it was on a Tuesday, about 10 a.m., telling me ‘we emailed your application, it’s got to be in by 2 o’clock,’” he recalled. “So I scrambled to put this application together. I was calling my accountant. I mean, it’s not an easy process to put the application together.”
The slog didn’t end there, he said.
“Every day I was getting emails from them asking me for more information, more information,” Menares said. “And I was talking to my accountant who was helping other clients of his go through the process. He was flabbergasted by the idea that they were asking me for paperwork that most other banks were not asking for.”
Within another week it was all moot because the program had run out of money.
Menares’ experience is not unique, said Michele Siekerka of the New Jersey Business and Industry Association. Hundreds of other New Jersey-based small businesses were also shut out from the program.
She says PPP, which is in line to receive another $300 billion round of funding under a measure passed by the Senate on Tuesday, was flawed from the beginning in its limited scope.
“The intent was to keep people off the unemployment rolls,” she said. “The problem is at the end of eight weeks their doors aren’t going to be open yet and where’s the money going to be to operationalize the re-opening?”
She pointed to the hypothetical cases of a restaurant to make her point.
“They’ve got to get their inventory back up and they have no revenue to buy that inventory,” said Siekerka. “How about what we’re going to have to put into place to provide for social distancing. There’s going to be capital expenses, so there’s no money out there to address those operational needs that are really going to be how we stimulate the economy.”
Wissam Elmasri, who owns Uncle Momo’s, a popular Lebanese restaurant in Jersey City, knows that all too well. He, too, was shut out of the first round of PPP funding, and his small cafe is struggling. Right now, he’s relying on the good will of a loyal customer base.
“It’s not just by ordering,” he said of his patrons. “It’s supporting, donating, calling support. They’re trying anything to make sure that we are capable to make it, to be running until this pandemic goes away.”
Elmasri says his landlord has been understanding, holding off on collecting rent. His manager drives employees to and from work to minimize their exposure to the virus. He’s right on the edge and says he plans to apply for PPP relief as soon as funds becomes available in order to hold on to his staff.
“Me, personally, I have issue with hiring people, very difficult in Jersey City,” he said. “So I’m trying to maintain my workers. That is my priority here in the restaurant.”
Meanwhile, in Asbury Park, where COVID-19 has silenced storied rock and roll venues, the owners of the venerable Saint club are getting assistance in a different way.
Reports that the owners were contemplating a sale sent a ripple through the community.
“We had a few choices but we decided to say let’s test the waters and see about possibly selling the Saint or looking for a partner,” said Scott Stamper, the club’s owner.
Now fans from far and wide have stepped up and the plan to sell has been tabled.
“Like the next day, somebody started a Save the Saint GoFundMe and it was amazing,” Stamper said of the fund, which now totals more than $35,000. “I felt very moved by the people of Asbury Park and New Jersey and really the world.”
Stamper said he doesn’t expect the SBA to be interested in lending money to a rock and roll club, so he’s looking at other potential revenue sources, like developing an online streaming service.
It’s just another example of how small businesses are going to have to reinvent themselves in a post coronavirus world if they want to survive.