Round Two Paycheck Protection Program Loans: Will Californians Get Money This Time Around?
(CBS13) — Round two of the Paycheck Protection Program began Monday, with $310 billion available in forgivable small business loans. However, the first round of funding did not go well for California small businesses and many are concerned about a repeat.
The initial $250 billion that congress allocated for the loans ran out in under than two weeks. Banks were criticized for giving the money to big business instead of mom and pops and data shows that California business received less loan money per capita than any other state.
Analysts believe the new infusion of loan money will run out quickly because so many people already applied during round one.
CBS 13 investigative reporter Julie Watts has been digging deeper into the lessons learned from round one - to help guide California small business owners on how to get some of that elusive loan money this time around.
Small Business Money Going to Big Businesses
In early April, John Richards lined up with everyone else outside his his long-time bank, Wells Fargo. As a personal and business client for more than 30 years, he was hopeful his bank would process the Paycheck Protection Program (PPP) loan he needed to keep his local pharmacy afloat. But like most, he left empty-handed.
"She suggested we look at other banks," he said recounting his conversation with the Well Fargo loan rep.
Four big banks, including John's, are now facing lawsuits alleging they prioritized bigger customers because their PPP loans resulted in bigger fees for the banks.
"This was gonna be for the small mom and pop businesses so that they could keep people employed," Richards said.
Companies including Ruth's Chris, Shake Shack and the Lakers got loans while many smaller businesses were left behind.
"The government seems to be very proud of the fact that they extended 1.6 million loans in the first round," CBS News business analyst Jill Schlesinger said. "But, you know what, there are 30 million small businesses."
Schlesinger says this time around, the feds issued guidance that publicly-traded companies should not be applying for these funds.
In fact, according to the SBA, companies have returned more than $2 billion in loans so far. Shake Shack and the Lakers are among those that have returned loan money.
READ ALSO: Davis Publicly-Traded Company Gets Federal Loan While Smaller Businesses Wait
California Business Got Less SBA Money
Another issue impacting California small business is the overall lack of PPP loans that were granted in the golden state.
California businesses have received less Small Business Administration (SBA) money per capita than any other state.
While states like Kansas, Nebraska and the Dakotas got enough loan money to fund around 80% of eligible payrolls in their states, California barely got enough loan money to fund 38% of its payrolls.
The issue was raised by members of Congress and the Governor. The Governor's office told CBS13 that it is waiting on more data from the SBA to try to understand why California businesses have received so little money so far.
How Can California Businesses Get Loan Money This Time Around?
The simple answer is to reapply and consider small community banks or credit unions.
Schlesinger says businesses should follow up with their original loan application, then they should consider putting in a second application at a smaller community bank.
Locally, the small businesses that did get loans during the first round seemed to have better luck with smaller banks.
Richards' pharmacy business was one of them.
He said when his Wells Fargo banking rep told him the big bank wouldn't be able to help, she suggested he try a smaller bank.
"We ended up going over to Five Star Bank and telling them our story," Richards said.
He said the local bank jumped into action, guiding him through the process, and funded his loan within four days.
Now, the small business owner says he's moving all his money to a small bank.
"They really showed us what being a small bank is all about and being committed to the community," John said.
In an email to CBS13, Wells Fargo provided the following response:
"Wells Fargo is working as quickly as possible in compliance with the regulations and guidance provided by the U.S. Treasury and Small Business Administration (SBA) to prepare applications from small business customers for submission to the SBA. We have mobilized thousands of employees and launched new technology to assist customers seeking access to the PPP."
