As the federal government unveiled its second round of the Paycheck Protection Program on Monday, many nonprofits reported struggles to access the newly available loan program. As with the first round of the stimulus package, which lender an organization was working with seems to have an outsized impact in the application process.
Grand Street Settlement Executive Director Robert Cordero credited his nonprofit’s ability to access a loan through the Paycheck Protection Program during the first round of funding to its working relationship with Spring Bank, a community development financial institution. Conversely, Stephanie Nilva, who heads the nonprofit Day One, said her organization didn’t get a loan despite submitting it within the first hour of the application window and had difficulty communicating with Bank of America throughout the initial process.
“I don’t feel optimistic,” Nilva said about her organization’s chances in the second round of funding. “I feel well below 50% levels of optimism on whether we’re going to get this loan at this point. … We had a long-term relationship with our bank, we had a credit relationship with our bank, we had checked all the boxes.”
The Paycheck Protection Program has been of particular interest, given that it offers loan forgiveness for recipients that keep staff on their payroll, though a certain amount of money can also be used for other expenses. Within the first two weeks of accepting applications, the program exhausted its $349 billion in funds. Applicants that failed to get funding the first time and a slew of new applicants have created “unprecedented demand” for the $310 billion in funding that became available starting Monday. But delays are hampering the federal government’s efforts to approve those loans.
As news of publicly traded companies like Shake Shack receiving these loans emerged, The New York Times reported that many of the country’s largest banks prioritized wealthy clients applying for loans rather than administering them on a first-come, first-serve basis. This second round of funding also included an additional $60 billion for smaller lenders such as community banks and credit unions, which officials have said are more responsive to smaller institutions.
“The difference-maker for us was that I did not trust that our longtime bank, Chase, would be able to prioritize us in this program,” Cordero said, “especially when we were reading that the fund could go very quickly. We’re competing head to head with small businesses. I didn’t realize at the time we were going to wind up competing with Ruth’s Chris Steakhouse and the LA Lakers.”
For Nilva, the additional support for smaller banks is cold comfort.
“I think that’s wonderful, but it’s not helping us now that we’ve invested all this time and effort to get in line with a billion other people at our bank,” she said.
Members of New York’s congressional delegation are also now calling to add larger nonprofits to the loan program. In a letter sent to the U.S. Small Business Administration last week, Rep. Carolyn Maloney and 14 other representatives wrote: “Modifying the eligibility requirements would also benefit struggling communities and alleviate some of the burden on government resources, as many charitable organizations are in the position to not only bring back furloughed staff but also hire additional employees.”
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