Edward WebbThis article originally appeared May 12, 2020 in the San Francisco Chronicle

Two rounds of federal loans are helping Bay Area small businesses rehire workers and survive the coronavirus fallout. But owners say it’s a temporary fix amid the worst job losses since the Great Depression.

The Paycheck Protection Program, which included a $349 billion first round and an ongoing $310 billion second round in forgivable loans, helps businesses pay workers during widespread shutdowns.

As of Friday, the government had issued second-round loans totaling $188 billion, with $35.8 billion going to California, the highest amount for any state. There was $122 billion that hadn’t been allocated.

Caitlin Meade, co-owner of Native Co., which has two San Francisco restaurants, tried unsuccessfully to get a loan in the first round. She switched banks from Chase to Emigrant Bank and received $181,437 in the second round.

“It extends a lifeline to us in the short term, but doesn’t address the long-term concerns and financial instability restaurants are facing in the next one to two years,” she said.

The loan will help the company rehire 15 of 20 employees who were laid off recently and survive for about two months. Native Co. has one restaurant location closed and one location at 168 Sutter St. serving only takeout, which led to the earlier job cuts.

In order for a loan to be forgiven, the company must use the money for expenses over the eight weeks following the funding date, with 75% spent on payroll.

“It is critical that most or all of this loan is forgiven,” Meade said. “We simply aren’t in a position to take on more debt.”

Chuck Doyle, managing director of business capital at Emigrant Bank, helped Native get its loan, along with over 70 other companies around the country.

He said that clients are having a better experience during the second round of loans, following widespread complaints in the first round, which ran out of funding in 13 days. Loans over $2 million also will be audited, after reports of large companies receiving loans designed for small businesses in the first round.

“I think it’s a Band-Aid and certainly appreciated. I think there has to be a third round,” Doyle said.

San Francisco’s Exploratorium received a nearly $5.9 million loan, which enabled it to rehire and reverse salary reductions for almost 250 staff, the museum said. Around 150 on-call staff members are still not working during the museum’s closure.

Edward Webb, a partner at accounting firm BPM, said a greater number of his clients have been receiving loans in the second round.

“They are doing a better job of processing them and getting money out to people,” Webb said.

The scale of the program is unprecedented. But the economic fallout is even worse.

“I have about 35 years of experience. I’ve never seen anything like it,” he said. “The speed has just been extraordinary. It was just, boom, the lights went out.”

Despite some successes, numerous business owners reported negative experiences with their banks, which process the loan applications.

Lis McKinley, owner of Let’s Make Room, a home-organizing service in Oakland, applied for a loan with U.S. Bank, she said.

She didn’t hear back from a bank representative about her application despite multiple follow-ups. She applied for a $6,250 loan to cover two months’ worth of pay and expenses for her.

“Since my bank was dragging its heels, I started looking for other sources of funding,” she said.

A U.S. Bank spokeswoman said the bank facilitated more than 18,000 loans in California, worth approximately $1.6 billion, with 82% of the SBA-approved loans under $100,000.

McKinley ended up using Opportunity Fund, a lender in San Jose, and received $6,250 on Thursday, a week after her loan was approved. She said the funding has been a relief amid the pandemic uncertainty.

Allan Mann co-owns Under One Woof, a pet-care center in Alameda with his partner, Seiji Morikawa. He said they’ve been waiting for an update from Citibank after the bank notified them saying they weren’t qualified for a loan because of a lack of line of credit. But Mann said they took an equity line of credit last year. While a banker looked into the situation, the first round of PPP funding ran out. They’re still waiting on a follow-up from Citibank and decided to submit a new application Thursday; they received a note shortly after saying they weren’t eligible, with no explanation given this time.

Citibank said it reached out to Morikawa but declined to comment further on the situation. The bank has submitted more than 27,500 applications totaling $3.4 billion in loans for small businesses and has funded nearly $3 billion and rising, a spokesman said.

Under One Woof had 17 employees who were all laid off as the business shuttered during the pandemic.

“We went from earning $65,000 to $70,000 in revenue a month to zero,” Mann said.

He wants the funding to cover the cost of rent that’s building up and to pay employees who return. Rent is $3,860 a month for his business, he said.

In the weeks of waiting, he’s starting to lose hope.

“It may all be moot since the PPP loan forgiveness requires that we rehire all our employees within a limited time period, which we may not be able to do,” he said.

Local health orders mean it will be difficult to accommodate his regular employees and customers.

“It makes no sense for us to borrow money — even at really low interest — to pay employees for whom we have no work,” Mann said.


Headshot of Edward Webb.

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