Melissa Harris-Perry: This is The Takeaway. I'm Melissa Harris-Perry. Let me take you back to the early days of the pandemic. No, no, don't worry. We're not going to relive lockdowns and sourdough starters. Back in March of 2020 when we were still trying to figure out what COVID-19 was, when residents from a majority of states were under mandatory stay-at-home orders, job losses soared when employers slashed roughly 870,000 jobs in March, and in April that number grew to 20.5 million. In response, Congress passed the Cares Act Relief Bill, which included the Paycheck Protection Program that gave out loans to small business owners. Reporter Bryce Covert has been following the program since its inception.
Bryce Covert: When it was first created, it was meant to offer small business owners a lifeline to keep their employees on payroll, to try to keep them from going under. It was this emergency system set up because businesses everywhere were basically completely shut down.
Melissa Harris-Perry: Now to date, banks around the country have distributed nearly $800 billion through 12 million PPP loans. These loans they really did help. In fact, we ask you what they meant for your businesses.
Kelly: This is Kelly from Dallas Texas. I own three small businesses all in the home furnishings industry, and without the PPP money, all three businesses would be out of business. The industry was shut down, the wholesale and the retail side so we're grateful for what we got.
Joe: Hello. My name is Joe and I'm calling from Whitman, Massachusetts. We have a small family-owned machine shop that has existed since 1962, and we are down to just a small number of employees. This PPP loan certainly kept us afloat, kept these employees coming into work, kept the rent paid. We're truly grateful that this was available to us.
Cindy Dalecki: My name is Cindy Dalecki. I'm calling from Ormond Beach Florida. My company received the PPP loan or grant. It meant saving my company. We've been in business for 11 years now, and it was a tough time. It was essential to keeping another small business alive.
Melissa Harris-Perry: Still, while the program did a lot of good, there are those who struggled to understand the forms or were denied loans altogether. Now even though the program was designed to forgive most loans as long as business owners use them for specified expenses, some are struggling to have their loans forgiven. Bryce Covert reported on this issue for The Intercept and learned that some borrowers are having problems with Bank of America, the second biggest PPP lender. I sat down with Bryce to talk about PPP and BOA. We started with a conversation about the launch of the Paycheck Protection Program.
Bryce Covert: It was rolled out very fast by an agency ,the Small Business Administration, which was not used to doing such things and certainly not so quickly. It was quite chaotic from the beginning. There were lots of stories about how difficult it was at first to get the loans and to figure out where to get the loans and how much you qualified for. I didn't really write about those stories, but I started to hear rumors from small business owners and worries from small business owners about the forgiveness end of all of this pretty early on.
These loans were always meant to be 100% forgiven if used for the proper purposes. In that way, they were supposed to act like grants, but of course they aren't grants. They were loans run through banks. The promise was always very prominently made, if you use these correctly, they will be completely forgiven.
As early as April 2020, I had small business owners sending me the paperwork their banks were giving them saying, "This paperwork says either nothing about forgiveness or it says forgiveness might apply. All or part of the loan may be forgiven." As early as then, small business owners were flagging, "I don't know how forgiveness is going to work or if it's going to happen." Then low and behold, over the next two years almost it's become clear that that process was not straightforward. For a large number of very small business owners has become a huge headache.
Melissa Harris-Perry: All right. First let's walk through that process a little bit because I think we hear, "Oh, the SBA federal government decided to make these resources available, so why in the world would private banks even have anything to do with it?" Help us just understand when you say that there are loans and that companies like Bank of America and others are actually the ones making the loans, then what was the SBA's role here?
Bryce Covert: The SBA oversaw the program, and it issued the rules, and it's also on the hook. If a business owner defaults on the loan, the SBA takes a hit, not the bank. Otherwise they are basically just loans routed through the middlemen of banks. That's just how the federal government decided to set up this program. Other countries made different choices.
Denmark, France, Germany, the Netherlands, they made direct grants to companies just covering their payroll costs. At least in the beginning of the pandemic, they said, "We're just going to pay you directly for the money you spend employing people so that you don't have to lay people off." That's just not the route we took.
We decided to put banks in the middle. I think in some ways because again the SBA is a very small agency. We didn't have this infrastructure. It had never done this before. I think there was concern that it just couldn't handle it, so they brought in banks as the middlemen. Unfortunately, I think that's come with a lot of problems on the other end for some small business owners.
Melissa Harris-Perry: They were meant to transform into grants but were given as loans. We have darn near zero interest rate these days, but what is the interest rate and what are the repayment terms looking like? Is this the kind of thing that if it's not forgiven that small businesses need to pay back the totality of it swiftly?
Bryce Covert: Not necessarily. It's 1% interest, which is not a ton, and the terms seem to perhaps vary. I think it's supposed to be over 10 years. Some small business owners have told me that they were told they had to pay it back faster than that and had to push back on it. In theory if you are a well-functioning profitable large business, a 1% loan over 10 years is not that big a deal, but we're talking about very, very small businesses. These are people who it's one person who owns it. They have maybe a couple of employees. They've been hit very hard by the pandemic.
They are still being hit hard by the pandemic. A lot of them aren't even making money yet. They're still in the red. Any extra debt burden, anything they have to pay back, could be a real big struggle particularly because this money, again, it came into their bank accounts in let's say May 2020, maybe a little bit later, it came in, and basically went right back out.
The money was supposed to be spent within-- depending on when you got your money because the rules kept changing; 8 weeks, 16 weeks. You had to get this money out fast.
It made sense because this was meant to be propping you up on an emergency basis, but the money is gone. It's been spent. Now they're trying to figure out how do I pay this back, do I pay this back?
Some are fortunate enough to have profit coming in and they can pay it off, but that's of course money that they would have otherwise invested in their business. Others are not in that situation and have had to come up with other solutions. One told me he got a grant from a totally different SBA program and turned around to just spend the money to pay it off because he had no other way to do it. Could have really used that grant to invest in his business, but he didn't have that choice. He had to pay back the money his bank said he owed.
Melissa Harris-Perry: All right. Let's talk about why some of these banks are saying that the loans can't be forgiven. When you're talking about very small businesses, is this-- Or at least my understanding is that at least some of this had to do with what counts as an employee. If someone is an independent contractor working on a 1099, then that wasn't forgivable and only people who were on full-time payroll. Then, also, maybe a question about whether or not fringe benefits like health insurance could be covered.
Bryce Covert: These are the questions that are coming up. I have some empathy for everyone involved in this process. This was a very chaotic program that changed constantly. Rules were just continually being issued. Everyone was trying to figure out what they were. Back in April 2020, when I was looking at the paperwork, there was confusion around full-time equivalent employees. What does that mean? How do I define it? Again, can I use this to pay the contractors? Because these are small businesses.
They often don't have direct employees. They have contractors. The banks in some of these instances as they're saying, "Well, according to the SBA's rules, it's not supposed to be spent the way you spent it so we can't fully forgive it." The business owners are saying, "Look, first of all, I spent it the way I understood that I was allowed to spend it. This was not spent on a yacht. This was spent on people doing work for me so I didn't go under. Also, you processed and signed off on my loan."
A lot of these small business owners they don't have necessarily accountants or someone who helped them through the application process. It was the bank itself. Someone from the bank got on the phone with them said, "Let me rush your application through, figure it out," and then the bank stamped its approval and said, "Here's the amount you're eligible for. We'll get you in." They were like, "Okay, great. If you say I'm eligible for $10,000, let's do it." Now the banks are turning around and saying, "Well, you shouldn't have gotten all that money." The small business owners are saying, "Well, then why did you give it to me?" There's a breakdown in this process. The unfortunate thing is that the burden is landing squarely on the small business owners who really just cannot afford to take this hit.
Melissa Harris-Perry: You say you have empathy for everyone in this process. Am I meant to have empathy right now, Bryce, for Bank of America? Because I got to tell you, I'm going to have some trouble working that one out.
Bryce Covert: I do think they think they are following the rules as they stand. I think the question in my mind is, does this really matter so much? These are tiny loans. The people I've talked to, all their loans are for under $100,000. These are small amounts of money to Bank of America, to the federal government. Now to the small business owners, they're huge amounts of money, but for Bank of America, this is barely anything.
At one point, Congress considered just automatically forgiving loans under $150,000. Even the SBA set up its own process for loans under that amount through which business owners are supposed to basically be able to say, "I swear to the best of my ability that I should be given forgiveness." SBA says, "Great, you swear it, we'll forgive it." The challenge is that Bank of America is among a handful of banks that have opted out of that direct SBA process and are making their own determinations and throwing their own wrench into it.
I don't know why it's worth it to make such a headache for small business owners when the amounts of money on the line are so minuscule.
Melissa Harris-Perry: Let me ask what seems like-- I mean I hate to ask it, but we know that the PPP dollars going out that there were some very real racial differences that Black-owned businesses were having a particularly hard time securing these loans in the first place. Now that we're looking at this question of forgiveness versus repayment, are there either gender differences with women-owned businesses, racial differences with Black and Latino-owned businesses?
Bryce Covert: Unfortunately, I think it's likely. I don't have numbers for where things stand now, but when I was first reporting this, in early last year, when a lot of business owners were just struggling to get through the forgiveness process, it was falling heavily on Black business owners. They were three-quarters of those who hadn't received forgiveness by March 2021, which, at that time, it had been about a year. They were like, "I need this money wiped off my books." It was Black business owners who weren't getting through the process.
I think it's likely that the same thing is happening here, particularly because these are such small loans, such small businesses, those tend to be owned by people of color, those tend to be owned by women.
Melissa Harris-Perry: Give me an example of what kind of business we're talking about here.
Bryce Covert: There's a dance and pilates studio in Illinois. You can imagine how difficult that is right now. It's all in-person. She said, "I've tried to pivot to Zoom and I've tried to invest in what that takes," but she's riding the waves of this pandemic. The last one just hit her really hard, and everybody's scared away again. It's someone who does music for weddings.
Again, some of it came back, and then it went away. It's these businesses where they have this passion, they launched it, they're trying to keep it alive, they're doing the best they can, but things are still not good. Most of these businesses are not doing great. They're hanging on.
Melissa Harris-Perry: What are the options? What can small business owners do if they have questions about whether or not their loan, which they believed would be forgiven, that they're being told by their lender that it's not going to be forgiven?
Bryce Covert: Bank of America told me that all business owners are free to go to the SBA and appeal Bank of America's decision. The hitch in that is that to get to the SBA, they have to apply for forgiveness through Bank of America and basically accept the lower number that Bank of America says, and then hope that the SBA agrees with them that they should get the full amount fully forgiven.
That is, in theory, still an option to them. I will say the SBA has not seemed to be super responsive. They have not given me a whole lot of comment. Small business owners say they have not been super responsive to calls, but they are there, they should be sorting this out. The other thing that small business owners have been doing is talking to lawmakers, calling their senators, calling their congressional representatives, saying, "You need to do something about this. You know how you talked about automatically forgiving loans? Could you do that? Could you give the SBA more legislative authority to step in here?"
Then the other thing they're doing is just banding together. There's a small business owner who has started a Zoom support group that meets once a week just to try to figure out, what can we do, and also can we just support each other through this?
Melissa Harris-Perry: Bryce Covert, independent journalist writing about the economy. Thank you so much for joining us.
Bryce Covert: Thank you so much for having me on.
Melissa Harris-Perry: One of the small business owners who received a PPP loan was Amy Yassinger, owner of Yazz Jazz Music & Productions in Chicago, Illinois.
Amy Yassinger: I kind of wear three different hats. I'm a professional singer and entertainer in the Chicago area, I teach private singing lessons to teenagers, as well as run a music and entertainment company specializing in weddings and events.
Melissa Harris-Perry: Now, obviously, there weren't any weddings or events, or even in-person singing lessons happening back at the start of the pandemic. Yassinger started doing some research on all of her options.
Amy Yassinger: Bank of America has been my bank for 20 years, and they were sending emails out in March of 2020, encouraging small businesses to apply for forgivable PPP loans. On April 3rd of 2020, I applied for a PPP loan through Bank of America. However, I did not complete my application because I was very confused on the whole process and I was very overwhelmed.
It was just a very scary time, mainly because people who work with me are primarily contractors. They're singers, they're instrumentalists, they're DJs. I didn't have employees in 2019. I didn't finish the application because I wasn't sure I would have qualified.
Melissa Harris-Perry: Yes, this is true. Back in April 2020, the Small Business Administration said that small business owners should not use 1099 workers or contractors for the purposes of getting a loan. Then a Bank of America banker contacted Yassinger about her application.
Amy Yassinger: I said, "Okay, I paid the contractors $185,000 in 2019. Are you sure I can put that down as what my estimated payroll would be?" This banker assured me, "Yes, absolutely. You put that on the application. Absolutely." I did. I submitted the application. The only documentation I submitted was my 2019 tax return, which clearly stated what my financial situation was.
Melissa Harris-Perry: Yassinger says she also signed an addendum that stated she would work with independent contractors. The bank reviewed her application, and at the beginning of May, she received almost $39,000 in PPP loan.
Amy Yassinger: I started payroll, I added 12 people to my team as employees, I distributed the money, and by October 16th of 2020, that PPP loan was spent. Meanwhile, I had contacted the bank many times stating, when can I apply for forgiveness? When can I apply? They said to be patient, they're streamlining the process. I have a PPP loan of under $150,000 so I had nothing to worry about.
I was just twiddling my thumbs, waiting to see what was going on. Starting in early 2021, we were bouncing back. I stayed afloat, my business was doing its thing. Then in March of 2021, Bank of America reached out and said that the maximum amount of forgiveness I could apply for was $2,436, which would put me on the hook for $36,000. That was almost a year ago, and I have been trying to understand how I fell into this mess.
Melissa Harris-Perry: Yassinger hired an attorney and tried to negotiate with the bank and the Small Business Administration, but without any luck. December of 2021, she finally gave in and started making payments on her loan. In a statement, Bank of America said to The Takeaway, they wrote, "In the forgiveness process, we are required to follow the Small Business Administration's rules and guidance. The guidance has been clear the payments made to contractors do not qualify for forgiveness under the SBA's rules."
Yassinger's business is doing okay now, even if it is sometimes a stretch to get by. She's been able to connect with people facing similar issues, all with Bank of America. They own different businesses throughout the country, and so far, about 40 of them have created a group on Facebook. They hold Zoom meetings every Monday.
Amy Yassinger: We've all made attempts at working with different Congresspeople and senators, and we've all gotten different reactions. What we found is there's just this song and dance between the lender, Bank of America, pushing the blame onto the SBA, and then the SBA is pushing the blame onto Bank of America. Then, of course, our senators are saying, "Well, you should have known what the rules were. We don't really know what we can do."
Well, we know what you can do. You can fix this because I think what we're understanding is that there's this fear that a lot of businesses use the PPP loans fraudulently, but we did not. We used these PPP loans for forgivable expenses. We have the documentation, we all were using this in good faith. We want to make sure that we get some help because we were not the ones who took out $2 million and bought Teslas and traveled across the country and bought homes and stuff like that. We were literally just trying to survive.
Melissa Harris-Perry: Thankfully, Amy and her fellow business owners are receiving a bit of outside help.
Amy Yassinger: There's an advocacy group working with us, trying to help fix our situation as well because I guess it's a little bit more widespread than we actually thought.
Melissa Harris-Perry: Christopher Martin is not part of Yassinger's group but is facing similar challenges with Bank of America.
Christopher Martin: I own a small S corp called CT Martin Incorporated that does concierge IT services. I am based in Michigan and do most management by remote and have clients in Los Angeles and New York and other places I've lived. I focus on small businesses, restaurants, cafes, fitness industry, and small medical practices. The government COVID shutdowns destroyed my clients and my business, and PPP was truly a lifeline
Melissa Harris-Perry: Shortly after he applied, Martin was approved for about $11,000 in PPP loan. A year later after he'd already spent the money on his business, the bank told him they'd made a mistake and the loan should actually have only been about $3,700. After five months of trying to appeal and get in touch with representatives at Bank of America, Martin was put in contact with the SBA through his member of Congress and ended up having to use a different grant program to pay back his loan.
Christopher Martin: After a lot of exchanges, the SBA rep had me apply for a special EIDL loan program that included a grant for those in hard-hit economic regions. I received this grant and had to use it to pay off the Bank of America PPP loan to stop their threats. I'm still slowly rebuilding my business and spending whatever I make to restore the business I have had for over two decades.
Melissa Harris-Perry: Thank you to the small business owners who shared their stories with us. We reach out to the Small Business Administration about this story, and they declined to comment. We also reach out to Bank of America, and you can find their statement in our show notes.
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