Brian M. Adams is a co-owner of Daisy’s Nashville Lounge, a new bar in Patchogue that was open for four days before the coronavirus pandemic forced it and other nonessential businesses to shut down. He spoke with Newsday's James T. Madore about what it's like to find funding to keep his business alive.  Credit: Courtesy of Daisy’s Nashville Lounge

Small businesses owners on Long Island are angry and dismayed by the federal Paycheck Protection Program, which was supposed to give them cash to survive the commercial shutdown caused by the coronavirus pandemic.

Instead, the owners said they’ve been given the runaround by banks and other private lenders that appear only interested in helping longtime customers and public companies. The owners complained about websites that won’t accept loan applications and conflicting information from bank employees and the U.S. Small Business Administration, which oversees the PPP.

With the program expected to exhaust its second round of federal loan guarantees in days, not weeks, small business owners said they are anxious about their future.

“There is a massive amount of anger, frustration and disgust,” said Eric Alexander, founder of the downtown advocacy group LI Main Street Alliance, citing its survey of about 1,000 small business owners over five weeks.

“Upstanding businesses that never asked for a loan, never were behind on any payments to their bank, were frozen out of the PPP,” he said. “SBA-approved lenders have largely failed to process applications to the smallest businesses.”

The owners of Merokee Day School and Camp Inc. in Merrick went to four banks before one would process their PPP application. By then, millions were ahead of them in the application queue nationwide.

Tracey Ferguson, left, director of Merokee Day School and Camp...

Tracey Ferguson, left, director of Merokee Day School and Camp Inc. in Merrick, with her mom, founder and assistant director Vivian Kanter. Credit: Merokee Day School and Camp Inc.

School director Tracey Ferguson said she hoped to secure a loan in PPP 2.0, having missed out on 1.0 when the first $349 billion in federal loan guarantees were exhausted in two weeks. This time around, $310 billion in guarantees have been authorized by Congress.

“I knew about this early, and I kept calling my bank and they knew nothing about it,” she said. “I went on their website multiple times a day but could never submit a loan application. I must have called the branch ... a dozen times, and nobody could help me. It was horrendous!”

Ferguson had the same experience with the bank where she has her personal accounts. She grew more frustrated after hearing that other child care centers, who learned about the PPP from her, had submitted loan applications.

Ferguson telephoned a bank in Massachusetts, near her family’s vacation home, and filed a PPP application after being told by three customer service representatives that she didn’t need to have an account. About a week later, a bank officer told her it wouldn’t consider her application for two weeks because she didn’t have an account. Later, she said she received an email saying the Massachusetts bank was only accepting applications from existing customers.

Finally, on April 9, six days after the PPP started, Ferguson successfully applied at BNB Bank after opening an account. She said she needs $87,300 to recall 13 employees and pay them for two months.

Ferguson now finds herself caught between BNB and the Massachusetts bank, which just  told her the Merokee school's loan application has been approved. 

"I don't know how I am going to get the funds because the [Massachusetts] bank doesn't have any of my account information," she said on Monday. "I told them not to submit my application to SBA because I was going through BNB. I'm not sure what's going to happen."

The Merokee school has an enrollment of about 75 children, from 18 months through kindergarten. The last day of classes was March 13 because parents increasingly kept their kids home to reduce exposure to the coronavirus.

Ferguson is paying rent, utilities and other expenses from a reserve account that her mother, Vivian Kanter, has always insisted upon. Kanter founded the school in 1977 and still works there.

Ferguson worries about how the school will operate in the future but vows that it will reopen: “I’m not going to let this [coronavirus] close me down.”

Six miles east, in Massapequa, the owners of Simple Smiles Photography Inc. had given up on securing a PPP loan -- and then it arrived on May 1.

Kathy and Doug Otto, co-owners of Simple Smiles Photography Inc....

Kathy and Doug Otto, co-owners of Simple Smiles Photography Inc. in Massapequa, are afraid their small firm will fall through the cracks. Credit: Simple Smiles Photography Inc.

“I didn't think there was any way; that we were too small,” said Doug Otto, who started the provider of school class photos with his wife, Kathy, in 2006. Besides the couple, Simple Smiles employs four independent contractors.

Otto twice applied for the PPP on the advice of his bank. He declined to reveal the loan amount but said it would pay the couple's wages for two months. "It's enough to get us through," he said on Monday. "I still can't believe the money actually arrived."

Separately, Simple Smiles received $2,000 from another coronavirus relief program: SBA’s Economic Injury Disaster Loans. That money "arrived on April 17 and was used up pretty quickly to pay some business bills,” he said.

Otto said he will dip into the couple’s retirement savings to sustain the business until September, when he hopes schools will reopen. In the meantime, he's used the couple's $2,400 federal stimulus check to make a mortgage payment.

PPP applicants generally have 500 or fewer employees and can receive a loan of up to $10 million. The interest rate is 1% with a two-year term and the entire amount is forgivable in some instances. Newsday secured a $10 million PPP loan.

In New York State, 245,346 PPP loans have been approved, totaling nearly $38 billion, as of May 1. The average loan size is $154,694, according to SBA. The agency couldn’t provide data for Long Island.

The PPP is “critical in the short term and can be a lifeline for millions of small businesses facing intense pressures,” said Greg Biryla, New York director for the National Federation of Independent Business, which lobbies on behalf of entrepreneurs.

A national survey of 885 of the group’s members found three-quarters have applied for a PPP loan but only 20% received funding before the first round closed on April 16.

NFIB research director Holly Wade said, “Small businesses were prepared and ready to apply…It is very frustrating that the majority of these true small businesses haven’t received their loan yet.”

Some entrepreneurs are seeking alternatives to the PPP.

Tim McCarthy and Brian M. Adams lack the tax and payroll records to apply for a PPP loan because their new bar, Daisy’s Nashville Lounge in Patchogue, was only open four days before nonessential businesses were shut down to slow the virus’ spread.

The pair said they invested more than $500,000 over six months in the country western honky-tonk, which features a large bar, a mural of Johnny Cash and photographs of other Grand Ole Opry stars on the walls. They’ve laid off all 20 employees because offering takeout service isn’t practical for a bar that most people never got the chance to visit, they said.

“We don’t qualify for the PPP because you need payroll from the previous year, and we only had four days of payroll,” McCarthy said. “Our banks are trying to find a program that would suit us but we’re kind of striking out. We can’t get anywhere with the SBA. They are overwhelmed,” he said.

McCarthy said he pursues every loan and grant program he hears about, and has applied for an SBA disaster loan. He said he was disappointed that $5,000 grants from the U.S. Chamber of Commerce were exhausted within minutes of the chamber opening an online application portal on April 20.

The business partners are now concentrating on funding sources for new companies.

“We want to pay off our debts and move forward when we do reopen,” Adams said, adding their landlord has been accommodating about rent payments. “We’re not looking for handouts or loan forgiveness. We’re looking for a low-interest loan,” he said.

The pair said they need about $300,000 “to get us where we need to be.” They are counting the days until Daisy’s Nashville can hold a grand opening ceremony and line-dancers take to the floor again.

“This is someone’s life savings, the time and effort you put into it,” Adams said. “It’s a little scary but we won’t give up until we get a loan.”

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