The federal government is adding another $310 billion to help small businesses hold onto workers through the coronavirus pandemic. The first round of $349 billion ran out in less than two weeks. And, perhaps, as with the first round, where businesses bank could be a big factor in whether they get a loan.
The second week of March will be one Barry Kahn won't forget. The CEO of the software company Qcue watched as all his clients put an indefinite halt to operations – hence doing the same to his business, too.
“Nobody tells you to expect a situation where all future revenue, including the revenue under contract, stops coming in on 48 hours' notice,” Kahn said.
The Austin company's bread-and-butter business is determining dynamic prices for live-entertainment ticket sales. That week, the NBA put its season on hold. Baseball and soccer leagues followed. Mass gatherings, like concerts and festivals, stopped. Everything Qcue had been built to do over the last 13 years suddenly was not happening anymore.
“It’s been an interesting time, and I think we’re lucky,” Kahn said.
Qcue was among the more than 130,000 Texas businesses able to receive a slice of the $349 billion set aside for the Paycheck Protection Program from the Small Business Administration.
The PPP loans are forgivable if the company uses the money for things like rent and mortgage or utility costs, and if it retains employees working before the pandemic hit for at least eight weeks.
After the fund ran dry, outrage grew over which companies received the loans: Large restaurant chains and publicly traded companies got money – all because of the way the bill was worded.
Applicants qualified as small businesses if they had fewer than 500 employees – at individual locations. So, larger companies, like Taco Cabana’s parent company with its 10,000 employees, qualified because that number is spread across dozens of locations. Those larger "small businesses" are big customers at the larger banks, and therefore got pushed toward the front of the line.
Kahn and his executive staff knew it would be a scramble to get a loan.
“This is going to be on a first-come-first-served basis, and we needed to be early in the queue, especially since we had done such good work [preparing]," he said.
Qcue was already in a virtual line, waiting for a loan through a separate SBA program passed in the first federal coronavirus relief bill. For that one, the company had to use a mix of new and old tech – different browsers, an old Windows computer and fax machines – to get its application into an overwhelmed government website.
But with the PPP, the government is using banks as the middle person. Where a company banks or applies may have made all the difference in whether they receive a loan.
"What community banks did very well was, instead of investing time trying to automate the entire process, they simply designed long work hours and manpower and talent around entering this information into the system."
Qcue uses Austin-based Horizon bank, which was sharing information about the process before it even started. The bank got everything it needed from Qcue before applications were open, so when they did, the bank was ready.
“They got our application in on Friday night to the SBA,” he said. “That was before banks had even begun receiving applications from companies and they had already submitted to the SBA. I think that was a combination of us being really proactive and pushing on this and having a local community bank.”
It was a different story for other small businesses. Kicking It ATX owner Greg Grovey banks at Chase, a subsidiary of JPMorgan Chase. The bank has been criticized for how slowly it handled PPP applications. Grovey and his sneaker store were not approved before the first round of money ran out.
“You know, everybody’s not going to be happy,” he said. “They have upped their communication. They sent out emails recently saying, ‘Hey, we apologize for not keeping you guys updated with the process. This is where your loan process is now. If the new round gets funded, this is where you are in it.’”
JPMorgan Chase and Wells Fargo have suggested customers even find another bank for the loans. Capital One had not even opened a web portal before the first round of PPP funding dried up.
So, what was different at smaller banks? First United, a regional bank based in Oklahoma, has six locations in Central Texas. Stephanie Verdugo, First United’s president of the Austin market, says larger banks are inclined to automate systems, which has helped them grow to the size they are. Community banks just do the grunt work.
“What community banks did very well was, instead of investing time trying to automate the entire process, they simply designed long work hours and manpower and talent around entering this information into the system,” she said.
Verdugo said her bank's staff worked nearly 24 hours a day, manually entering information into the SBA website. First United will fund more than $50 million in loans from just four Austin locations. She says between Oklahoma and Texas, her bank secured 10 times the SBA loan amount that a bank its size should be doing.
“We were able to help business owners that were at institutions that couldn’t handle the volume, and they were looking for that personal touch that community banks have been advertising for years,” she said. “I can say that community banks now have really put their money where their mouth is.”
Qcue was able to bring back its 30 employees with the PPP money – but it’s a short-term win. This buys the company only eight weeks. And Kahn knows live entertainment will be one of the last things to come back, so it will likely be a long time before Qcue generates money again.
“That’s really tough, because things like the PPP are going to stop being out there,” Kahn said. “There’s not going to be another round of stimulus if 70 to 80% of the economy comes back online. But if you’re in that [remaining] 20-30%, that’s really tough; there’s not going to be that next set of lifelines."
And that’s the situation Qcue and a lot of other small businesses are bracing for.
Got a tip? Email Jimmy Maas at jmaas@kut.org. Follow him on Twitter @maasdinero.
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