Small-business owners who applied for $225 million in Pennsylvania state grant money are finally receiving funds, but thousands more need help.

Among those still waiting is American Hats in Northeast Philadelphia.

“If we don’t get the grant? We would reduce our hours even more,” said American Hats factory owner Georgiette Morgan-Thomas, amid her noisy manufacturing floor at 2251 Fraley St.

Her plight is common. The number of small businesses open in Philadelphia has dropped by 24% compared to January 2020, according to Opportunity Insights, a Harvard-backed research institute. And while the city has regained jobs in recent months, it still lags about 50,000 jobs behind pre-pandemic levels.

Pennsylvania got $4 billion in CARES Act funding from Congress. The state allocated $625 million for block grant CARES Act funding for various counties. Out of $4 billion, the state allocated an initial $225 million.

But small-business owners applied for multiples of that: over 62,000 businesses applied for more than $1 billion. Just over 10,000 received money. (An updated list is available here at the dced.pa.gov/ website.)

“What we’re able to fund is a very small part of the need,” said Dan Betancourt, president and CEO of Community First Fund since 1999 and FINANTA since the two community development finance institutions merged in July.

The state Department of Community and Economic Development passes the money first to community-development lenders, such as Betancourt’s and other nonprofits that help small-business owners. These lenders then administer the grants to businesses.

So far, community development groups have disbursed $100 million of that $225 million allocated, in two rounds, and a third round is on its way. Those third-round grantees should find out in a few weeks how much they will receive.

However, recipients are spread across Pennsylvania. Philadelphia needs more help. Mayor Jim Kenney’s administration committed an additional $27 million.

The city received $277 million in direct CARES dollars, and “we’ve encouraged the mayor and City Council to also fund another portion of that towards small-business relief, as we have so, so many requests," Betancourt said, adding that the city has not acted yet. “This is federal money going to mom and pop businesses."

So far, 85% of the grant money from the state has gone to priority sectors, including restaurants, personal care companies, salons, event spaces, and other hospitality businesses, according to the latest data. Recipients in Philadelphia included The Polish Nail Salon, owned by Leona Vergantino, and Ismael Donzo, owner of Four Seasons Coffee and Donut Cafe.

Ismael Donzo is the owner of Four Seasons Coffee and Donut Cafe in West Philadelphia.
Ismael Donzo
Ismael Donzo is the owner of Four Seasons Coffee and Donut Cafe in West Philadelphia.

Small businesses that qualify for the grant ring up under $1 million in sales annually and employ 25 for fewer people. The average grant totals $20,000.

The state’s entire $225 million must be awarded by the end of 2020, Betancourt said. After that, Congress likely will pass another stimulus bill for more state funds. Applications for this round of funding are now closed.

Nearly 101,200 Philadelphians lost their jobs between March and April. But by August, 43,400 of those were back to work. Total employment in the city has slowly returned, rising to 690,200 in August. During the same month in 2019, there were a total of 739,400 — or about 50,000 more — employed in Philadelphia.

There’s been a “slow, steady but fragile” recovery for restaurants and retail, Center City District’s founding director Paul Levy told The Inquirer. Between July and late September, the number of Center City businesses that were open to customers rose from 54% to 79%. The hospitality and entertainment sectors, however, continue to struggle, having lost 30,700 jobs, or nearly 40% of the total.

American Hats

The Rev. Georgiette Morgan-Thomas, 72, bought the American Hats factory in the Wissinoming section in 2016 “because I wanted to stop complaining about nothing being made in America, and start making things in America. If I can do it, anyone can,” she said.

She employs 12 workers and with the hoped-for $20,000 grant could likely keep them all working. Without the grant, she’ll furlough or have to fire some.

In September 2019, American Hats opened its first major retail store in the new Fashion District Philadelphia mall, previously known as the Gallery at Market East. But after coronavirus hit, she had to close the store.

“We now sell to retail customers out of the factory here, they call here and shop at their leisure,” she said on the shop floor, walking amid racks of hundreds of felt fedoras, summer straw boaters, and feathered creations. “Hats are no longer a luxury item, especially in the cold weather.”

American Hats has branched out into selling Meghan Markle-style fascinators and is in discussions with a designer to market a hat with an antivirus masklike scarf that attaches to the brim. All her vendors are based in the U.S., including F&M Hat felt supplier in Denver, Pa., and feather suppliers.

American Hats sells online on its website and will do a pop-up shop inside the Philadelphia Museum of Art starting Nov. 6, through January 2021, for holiday sales.

“Anything we can do to drive sales, we’re doing. We are not closing — that’s not an option.”

Four Seasons Coffee and Donut

Ismael Donzo, 43, opened his Four Seasons Coffee and Donut Cafe in 2008 at 6643 Woodland Ave. in Elmwood Park near Kingsessing.

“Before coronavirus, business was very good,” he said. Then he went to visit family in Liberia, West Africa, and the pandemic struck. He was stuck there and couldn’t return for months.

“There was no business really anyhow, but finally I got home and we reopened” this past July, he said.

Donzo applied for a $5,000 grant from the statewide program, and he’s still waiting.

“I was assured it’s coming but I haven’t received it yet,” he said. The Four Seasons cafe isn’t just a coffee shop, but a “community center, a place to talk about sports, politics, [for] the Liberian community.”

He also works closely with FINANTA, the North Philadelphia-based community development financial institution that launched the ‘Affinity Group Lending Program.’ FINANTA provides loans to collectives of entrepreneurs, and the group is responsible for paying back each loan.

“If we don’t get the [state] grant,” he said, "we’ll keep moving, we’ll keep struggling.”

The Polish Nail Lounge

The Polish Nail Lounge founder and owner Leona Vergantino.
The Polish Nail
The Polish Nail Lounge founder and owner Leona Vergantino.

Vergantino runs her salon, The Polish Nail Lounge, at 2403 Fairmount Ave. and received both a state grant and a much larger federal Paycheck Protection Program loan.

Pennsylvania’s $225 million grant program is separate from the federal government’s PPP loans, which are widely expected to be forgiven if under $50,000.

“I was debt free prior to the pandemic, but I used my credit card to pay bills, utilities, and of course, rent,” said the 34-year-old business owner who employs 17 people and did 2019 sales of about $780,000.

Her PPP loan of $64,000 kept the doors open, although business has dropped off considerably.

“I was lucky, because I was working with the Women’s Opportunity Resource Center, and they fought for me to get the state grant” of $35,000, Vergantino said.

“This industry has been hurt so much more than others. Without the grant? I would close. My payroll is $7,000 a week. But I’ve been proactive about doing everything I can to save my business.”

For the fourth quarter and next year, she says, Philadelphia’s small-business owners need more aid.

“This got me to today, but we still need help. Our industry picks up during the holidays, but we lost 50% of our yearly revenue being closed just three months.”

The results of the state’s $225 million grant program are below:

Spokesman Kevin Lessard confirmed that, through the CARES Act, the City of Philadelphia received a $276.4 million Coronavirus Relief Fund, “which can only be used on “necessary” and unbudgeted expenses related to the pandemic that were incurred between March 1 and December 30, 2020. Many of these dollars are going to cover the City’s costs associated with its response to and recovery from COVID-19,” he said in an e-mailed statement.

“To date, we have committed $27.5 million of our CRF funds to small business and non-profit relief. These funds are in addition to the state funding, other City funding sources, and philanthropic dollars that we have received, which together total over $90 million that has been used to support business and non-profit relief.”

The City has plans to spend the full $276.4 million by December 30, 2020.

Of the $27.5 million in CRF funds that the City has committed to small business and non-profit relief, that includes $20 million which was directed to the Commonwealth’s COVID-19 Relief Pennsylvania Statewide Small Business Assistance program. The $20 million is to provide grants for some of the Philadelphia-based applicants who remain unfunded after the second round.

The Future of Work is produced with support from the William Penn Foundation and the Lenfest Institute for Journalism. Editorial content is created independently of the project’s donors.