One Small Business Owner Navigates the Obstacle Course of Applying for a PPP Loan

It’s been two weeks since the federal Paycheck Protection Program (PPP) launched its second round of funding, and ice cream parlor owner Kenny Blum is still waiting for his loan.

He’s been waiting since the program — created by the U.S. Small Business Administration (SBA) to help businesses survive the coronavirus pandemic — launched its first round of funding in early April.

Blum opened the Little Truckee Ice Creamery in the summer of 2017 after running a sea kayaking company out of Alaska for more than a decade.

“They say ice cream is recession proof,” he said. “I don’t know if that’s totally true, because I haven’t been through one yet with ice cream.”

Like a lot of other business owners in Truckee, he relies on tourism. In the high season last year, he said he had 20 employees. They help him with shop operations and staff the Creamery’s mobile trailer, which people can book for events.

The Little Truckee Ice Creamery’s patio on a typical day last summer. (Courtesy Kenny Blum)

Blum said this year, all his summer events, which kick off in May, have been cancelled because of shelter-in-place orders.

The walk-up window at Blum’s shop is still open, but since shelter-in-place began, most of the shop’s earnings have come from local ice cream deliveries.

The Little Truckee Ice Creamery’s patio this April. (Courtesy Kenny Blum)

Round One: Funding Runs Out

One of the driving factors behind the PPP’s popularity with small business owners is that if they meet certain qualifications, they are eligible for forgiveness of their loans.

When he heard about the program, Blum said he reached out to his bank, Wells Fargo, within a day of its launch. Wells Fargo is one of more than 5,000 lenders approved by the SBA, which is helping to oversee the program.

Blum said the bank’s website told him that he had to submit a request for his application before he could officially apply — Wells Fargo and other banks called  these “expression of interest” forms.

Around the first of April, Blum submitted that request. Two weeks later, he got an email saying that his application was ready to be completed.

Blum said he stayed up late to fill out the application and upload necessary materials.

“The next morning, I woke up to the headline saying that the PPP funding had run out,” he said.

What’s even more frustrating, Blum said, was that other small business owners he knows, who went to community banks, fared much better than he did. One of them got his loan the same day that Blum received the go-ahead from Wells Fargo to simply submit his application, he said.

Blum is not alone in his experience, and a coalition of small businesses in California has filed a lawsuit against Wells Fargo and three other major banks for prioritizing applications that they allege were more profitable to the banks.

Wells Fargo would not offer comment on the legal action. In addition to the suit, recent reports indicate authorities are now investigating Wells Fargo’s PPP lending practices.

According to the SBA, the paycheck program is first come, first served. The administration said it relies of a set formula to calculate loan amounts, so that once all paperwork is submitted, it should just be a matter of the banks processing submissions.

Still, it appears that loan processing, especially at some big banks,  was slowed for other reasons. Because the government rolled out the program so quickly, they were still firming up certain guidelines when it launched. Some larger banks took longer to process applications, according to a report by the Los Angeles Times, because they wanted more clarification on certain guidelines and feared they’d be sanctioned if their paperwork didn’t meet standards.

If a smaller bank spent less time on details and prioritized processing, they weren’t penalized, at least during PPP’s first round. In an online FAQ guide, the U.S. Department of the Treasury confirmed that any banks that didn’t initially understand PPP guidelines would not need to withdraw the applications they submitted during the first round.

Round Two: Which Bank to Apply With?

In the lead up to the second round of funding, Blum hoped the process would be smoother, since Wells Fargo already had his application from last time.

But even before the official launch, he’d started getting confusing messages about whether he’d have to start his application over. He decided to submit another one, because his branch’s staff said that was the safer way to go.

In an email, Wells Fargo spokesman Ruben Pulido confirmed that customers like Blum do not need to fill out a new application, and that the bank would continue processing loan requests in the order it had received them.

And that’s a good thing for Blum, because not only did the SBA’s portal crash on April 27, the first day of the re-launch, but Wells Fargo stopped accepting new PPP applications on April 30.

While many small business owners may feel stuck and frustrated because their applications seemingly aren’t moving forward, the SBA said there’s an alternative. SBA regional communications director Miryam Barajas confirmed that businesses can have applications open with multiple lenders, and that the system would ensure they are only funded once.

But as Blum and another small business owner who reached out to KQED found out, there’s a catch there, too.

When Blum tried to apply with other banks, including Plumas Bank, Bank of the West, Bank of America, Citibank and US Bank, among several others, he was told he had to have an established banking relationship prior to Feb. 15. That message is also posted on the above banks’ websites.

This means Blum and those like him are confined only to lenders with whom they had pre-existing relationships. It’s difficult to confirm how many banks have a similar “established banking relationship” policy because there are so many — California lending institutions take up almost 26 pages of a list of approved PPP lenders updated by the SBA last week.

In response to questions about this hurdle, Barajas said in an email that she was not sure how often lenders were turning away PPP applicants. She also reiterated that the SBA has approved thousands of potential lenders for the program

According to the most recent SBA report on the second round of PPP funding, more than $35 billion in loans were approved by California banks just last week — the most of any state.

As Nevada County, where Blum’s ice cream shop is located, eases towards reopening, there may be more walk-up traffic for Blum. The Creamery also re-instituted taco Fridays — for pick-up only for now.

Meanwhile Blum said he’s taking it day by day and doing his best to stay positive.

Copyright 2020 KQED