Bills Are Piling Up as NC Small Businesses Struggle to Access COVID-19 Relief

Business owners say they’re being forced to wait while the bills pile up.

The news from Wells Fargo came a few days late to be an April Fool’s prank, but it still felt like a cruel joke to Lee Rathers. 

Rathers’ father Richard employs two people, including Lee, at the Charlotte bookshop Book Buyers, which, like thousands of businesses across the state, has been rocked by COVID-19.

On April 3, he attempted to apply at the big bank for a loan under the federal Payroll Protection Program, only to be told that applications would not be accepted until the following Monday. A day later, Wells Fargo announced they’d stopped accepting applications.   

“We were going to apply that day,” Lee remembered.

Lori Konawalik owns Charlotte cat café Mac Tabby, a bar and coffee shop where patrons interact with felines available for adoption. Her business also banks with Wells Fargo. When she contacted the bank about a PPP loan, she was told she would have to wait to apply.

“[They]were upfront about not being able to process applications immediately,” she said. But while Konawalik continued to pay the bills at her temporarily shuttered café, including salaries for five staff members, the waiting dragged on for ten days.

“They’re big dogs [with] big lawyers and they probably had better opportunities to access the cash than anyone else.”

Lori Konawalik, of Charlotte’s Mac Tabby on big businesses crowding out small businesses for federal relief.

Mac Tabby and Book Buyers aren’t the only ones frustrated by the federal rescue initiative. Cardinal & Pine interviewed several more small businesses that sought federal relief in recent days, and all of them told similar stories. 

With well under 500 employees apiece, Mac Tabby and Book Buyers are the kind of local businesses the PPP was designed to serve. The program, part of a federal COVID-19 relief package, is overseen by the U.S. Small Business Administration, offering 1% interest loans that do not have to be paid for the first six months.

The $349 billion program ran out of money last week, but U.S. Senate lawmakers approved another $310 billion for the initiative this week, with $60 billion set aside for smaller lending facilities, including “community” financial institutions. Federal officials also budgeted $10 billion for grants through the SBA’s Economic Injury Disaster Loan (EIDL)  initiative, which provides an advance of up to $10,000 that does not have to be repaid.

But, in addition to its money woes, the PPP’s been dogged by claims that larger businesses are cashing in on the pandemic program too. 

Lee Rathers later learned that Wells Fargo stopped accepting loans because the bank exceeded a Federal Reserve-imposed $10 billion cap on loans. The cap was instituted in 2018 after Wells Fargo was found guilty of creating millions of phony accounts. On April 8, the cap was lifted, and the bank emailed Rathers, informing her that they would let her know when applications would be accepted again.

Book Buyers also applied for an Economic Injury Disaster Loan, but they’ve yet to be contacted about the loan’s status. And the SBA’s website has stopped accepting new applications. 

Scott Hanson is president and CEO of the Raleigh-based video production company ClickVue. Like Book Buyers and Mac Tabby, ClickVue is also seeking assistance through the PPP.   

“When PPP went live, Wells Fargo posted a link on their site saying they were still trying to absorb things and needed more guidance from the SBA,” said Hanson. 

On April 15, Hanson, Konawalik, Rathers and countless others finally got Wells Fargo’s go-ahead to apply.

But on April 16, as she was preparing her loan submission, Konawalik said she saw breaking news that the PPP was out of funds. To add insult to injury, CBS and other news outlets reported that most of the money had gone to large, publicly traded companies rather than small businesses.

“They’re big dogs [with] big lawyers and they probably had better opportunities to access the cash than anyone else,” Konawalik said. 

“It seems unfair,” Rathers told Cardinal & Pine. “Did they realize the catastrophe this is going to cause [and] the need small businesses have instead of these big companies?” 

In the meantime, North Carolina lawmakers are preparing their own economic relief program.

Republican leaders on a state House COVID-19 relief committee drafted a bill that would provide $75 million to small businesses through the nonprofit Golden LEAF Foundation’s rapid loan program. Leaders are still working out the details, but GOP and Democratic leadership in the House and Senate put out a rare joint statement with Democratic Gov. Roy Cooper promising a “substantial” appropriation for the program. 

And days before that, Senate Democrats convened six work groups to draft coronavirus relief recommendations, including proposals for small business aid. 

“Senate Democrats are not going to sit idly by while we have a pandemic racing across the state,” said Sen. Sam Searcy, the Wake County Democrat spearheading that working group. 

Released on April 20, their recommendations included deferring the payment of state sales taxes and income taxes, and suspending the requirement that hotels and restaurants prepay 65% of their estimated sales tax. Democrats also proposed loans of up to $50,000 for minority-owned and under-served businesses through the state’s Community Development Financial Institutions (CDFIs), such as the Carolina Small Business Development Fund and Piedmont Business Capital.

“[The CDFI’s] have traditionally worked with black businesses to help them to develop the infrastructure they need so that they are sustainable,” said Sen. Gladys Robinson, a Guilford County Democrat who coordinated the working groups. “With COVID-19 impacts, most of them find themselves without capital to pay their employees, or their bills.”

When Cardinal & Pine contacted the office of Senate President Pro Tempore Phil Berger, the chamber’s top Republican, to ask if the Senate Republicans, like the House GOP and Senate Democrats, had their own recommendations, Berger spokesperson Pat Ryan refused to answer the question, calling Cardinal & Pine “fake news.” 

However, Searcy said Monday that Senate Minority Leader Dan Blue and Berger were meeting to discuss the recommendations. “We’re talking legislative drafting by the end of this week in preparation for the short session [beginning April 28],” Searcy said. “We’re not going to wait. We cannot wait.”

For now though, North Carolina’s small businesses are simply waiting, waiting for relief of some kind, whether it’s from state or federal agencies. 

“I’m taking it day by day and doing anything I can,” says Konawalik. “It will be a sunny day in the neighborhood if funding comes through.”