Small business loans from SBA may not come fast enough: "I have the sense that they're overwhelmed"
The Small Business Administration began offering forgivable loans to small businesses impacted by the coronavirus pandemic a week ago. But, some desperate companies say the promised relief is not coming fast enough.
Evan Obsatz, whose family has run Butterfield Market, a New York City grocery and catering company, for 45 years, said business has slowed substantially during the coronavirus crisis.
"We had 2,000 customers a day walking in," Obsatz told CBS News chief investigative correspondent Jim Axelrod. "Now we're averaging just a couple hundred."
Obsatz said he can "realistically" stay afloat for a few more weeks. "We're still an essential business, but our funds are running low," he said.
The downturn couldn't have come at a worse time for Obsatz, who was in the midst of the biggest expansion in the company's history — a sister market around the corner that would have created 70 new jobs.
"This is caught in the middle," he said. "It's difficult to think that this might not happen, but I'm hopeful that it will."
Last Friday, the federal government tried to twist open the spigot on the $349-billion Paycheck Protection Program, money to help small businesses cover payroll for eight weeks. If the businesses retain their employees, the loan is forgiven. The cash comes from the federal treasury, but Americans have to apply through their banks.
"They heard that the funds will be released in the last half of April," Obsatz said. "That's two to three weeks away, so we'll see."
But, Alan Dule, whose accounting firm is guiding Obsatz and more than a dozen other clients as they apply for stimulus loans, said the SBA may not be prepared for so many loan applications. He, too, applied for one.
"The system is not prepared and capable of processing all these millions of loans, that's the worry," he said. "The SBA has never gone through anything like this before and I have the sense that they're overwhelmed."
It's not just the government — it's the banks, too. CBS News obtained a message from Wells Fargo explaining delays due to "high demand." They warned about "limited funds" that could "run out."
Chase Bank told Dule his loan is coming in a couple of days, but he's not counting on that.
"I'm trying to be realistic about it, and I'm telling my clients the same thing," he said.
Never in American history has so much of the economy simply vanished, so quickly. A 10-block walk in New York offered a glimpse of the evidence: storefront after storefront was plastered with makeshift one-page distress notes saying they're closed.
"The plan is being changed every day, and it seems like the individuals that are making the changes don't seem to know themselves what direction to go," said Percell Keeling, who has owned Simply Wholesome, a restaurant and market in Los Angeles, since 1984.
Keeling said he went to talk to his banker on Monday and he "didn't know what was going on."
"He was in shock," Keeling said. "He wasn't even informed, so he couldn't even inform us to apply, because he didn't know."
"The million-dollar question," Keeling said, is when the relief from the SBA will come.
President Donald Trump on Tuesday abruptly ousted the watchdog charged with spotting corruption in the more than $2 trillion that's just starting to flood the economy.
"It's going to be a literal playground for fraud," said Neil Barofsky, who served as the special inspector general during the 2008 financial crisis. "If this money and this firepower gets wasted … you're missing an opportunity to get it right, and we just cannot afford right now to get it wrong."
The SBA did not immediately respond to CBS News' questions, including how much money so far has actually gotten to small business owners?
In all of last year, the agency handled 60,000 loan applications. It's gotten nearly 500,000, more than eight times that, just in the last week.
While Obsatz awaits the verdict on his loan, he's started taking donations to feed the health care workers at overwhelmed New York hospitals nearby. So far, he's shipped more than 4,000 meals, and he's wondering how long he can keep it going.
