Small businesses are getting a second chance to grab a financial lifeline and stay afloat during the coronavirus crisis. But their initial struggles in securing emergency government-backed loans that quickly went dry inspired little confidence for the mom-and-pop shops, restaurants, and other small enterprises that need the money most.

“I’m looking to get money into my 27 employees’ hands because we had to furlough everyone,” said Tim Way, co-owner of the Ways Brewing Co. in Glenside, who has been unable to obtain a loan through the troubled Paycheck Protection Program (PPP). “We wanted to be able to give this money to them so they can pay rent and eat.”

He’s not alone. And now Philadelphia small-business owners are scrambling to get in line for the next round.

The House gave final passage Thursday to a measure that would provide more than $300 billion in new funding for the PPP, a Small Business Administration program that was meant to help firms keep employees on payroll during the pandemic. Many banks disbursing the loans were overwhelmed by demand, many of the smallest businesses struggled to get cash, and the PPP quickly burned through its first $350 billion.

“The big banks had so much volume, but they didn’t have a lot of people with SBA experience,” said Vernon Hill, executive chairman at Philadelphia-based Republic Bank. Smaller banks saw much less overall demand but approved a far higher proportion of loan requests. Even with the second wave of money, Vernon said, “some people will be left behind.”

The additional cash is coming amid rising criticism that the first round saw money meant for small businesses go to bigger firms — including some publicly traded companies. The question is whether banks and the federal government have sped up systems that frustrated many early applicants.

In the first application frenzy, larger companies with private bankers and accountants on-call were winners. Many had their lenders on speed dial. Smaller companies often turned to local banks and community lenders, instead.

The experience of JPMorgan Chase customers was particularly acute. The nation’s largest bank, JPMorgan said it approved only 26,500 loans out of the 300,000 PPP applications, or about 9%. Of those, about 8,500 went to clients of JPMorgan’s elite wealth management and corporate banking departments. Most who applied there were approved, and very few who applied without that edge weren’t. If JPMorgan were the Titanic, first-class business passengers survived, while most small businesses in steerage drowned.

Bank of America and Wells Fargo wouldn’t say how many loans they approved. But SBA data show they each approved 10% or fewer.

By contrast, mid-sized M&T Bank, based in Buffalo, N.Y., with large branch networks in Pennsylvania and Delaware, said it approved 27,000 of its 36,000 applicants, or 75%. And Parke Bank, a small lender based in Gloucester County, approved 230 of the 285 PPP applications — about 81% — pumping almost $60 million into the region, according to chief lending officer Nick Pantilione.

“My staff made sure we were prepared,” Pantilione said.

So what went wrong at the bigger banks?

“Despite more than 2,000 people working tirelessly to help as many small businesses as possible, we were not able to process all of those applications before the SBA funds were depleted,” JPMorgan said in a statement.

Kent Gushner, the third-generation president of the Philadelphia clothing store Boyds, closed in mid-March along with most businesses in Pennsylvania. For the next four weeks, he continued paying 125 workers from company savings. Then he collected a PPP loan of more than $500,000 from the Cherry Hill-based, Canadian-owned TD Bank.

Thanks to the PPP loan, Gushner said, he was “very proud to announce to our staff last week that nobody would be furloughed, at least through the middle of June.”

Many are turning to small local banks such as Huntingdon Valley Bank, where chief lending officer Hugh Connelly said more than $50 million in PPP loans had been funded by April 23.

“We have a funding surge building, and this pause, while the SBA reloads, affords every lender a chance to catch their breath, rebuild processes ... so when the money returns, we can be faster and more responsive,” Connelly said.

Huntingdon Valley loans were mostly to new customers moving their entire accounts over.

“We’ve probably facilitated the rehiring of 3,500-plus employees,” Connelly said. “We’re definitely punching above our weight class.”

M&T Bank processed loans for area small businesses including DFW Motel Supply, River Twice Restaurant, and Revere Suburban Realty, which were among more than 900 businesses borrowing more than $428 million.

By contrast, some PNC customers said they couldn’t get answers.

“Banks prioritized larger business customers first in the PPP program,” said Benjamin Kauffman, a doctor who runs a small ophthalmology practice in Northeast Philadelphia, employing 16 workers.

“We have been loyal customers with PNC bank for over 25 years,” Kauffman said. “We applied with PNC on April 4, the first day the PPP application portal went live.”

Other than one email, he’s heard nothing.

Benjamin Kauffman owns and operates a small ophthalmology practice in Northeast Philadelphia that employs 16 people. He's had no luck applying for an SBA loan through his longtime bank, PNC.
Ben Kauffman
Benjamin Kauffman owns and operates a small ophthalmology practice in Northeast Philadelphia that employs 16 people. He's had no luck applying for an SBA loan through his longtime bank, PNC.

“We took our obligations with respect to every application that was submitted very seriously, and sought to process it as quickly as possible,” PNC spokesperson Marcey Zwiebel said. “Ultimately, many of the applications that we were able to get approved by the SBA before the cutoff date were from very small businesses across our entire footprint.”

“We are working rapidly real-time hour by hour,” Dan Fitzpatrick, president of Citizens Bank of Pennsylvania, New Jersey and Delaware, said in an interview earlier this month. “We [normally do] several hundred SBA loans per month. This is thousands.”

Shanthy Brown, who owns Brown Eye Care optometry clinic in Mount Airy, applied for a $4,600 PPP loan through the nonprofit Women’s Opportunities Resource Center, having already dealt with the group for an SBA mortgage earlier this year.

Shanthy Brown, an immigrant woman from Sri Lanka who owns Brown Eye Care LLC, an optometry clinic in Germantown. She borrowed through the Women's Opportunities Resource Center. She first received an SBA Community Advantage Loan to purchase the building in which her business operates, and just received a $4,600 PPP loan through WORC, as well.
WORC
Shanthy Brown, an immigrant woman from Sri Lanka who owns Brown Eye Care LLC, an optometry clinic in Germantown. She borrowed through the Women's Opportunities Resource Center. She first received an SBA Community Advantage Loan to purchase the building in which her business operates, and just received a $4,600 PPP loan through WORC, as well.

She banks with Citizens, “but because of my experience with WORC, I knew I wanted to work with them,” Brown said.

Another issue has been access to loans for women- and minority-owned businesses. The next round of PPP funding includes $30 billion set aside for institutions specializing in loans to underserved businesses, including community development financial institutions (CDFIs) and minority depository institutions. Still, minorities fear they may again be left behind.

“The large majority of Latino-owned businesses were locked out of the first round of PPP,” said Noel Poyo, executive director of the National Association of Latino Community Asset Builders. “We don’t expect that status quo to change.”