WASHINGTON, D.C. -- Michael Shemtov is struggling to keep his small cafe in Charleston, South Carolina, afloat. He has already shuttered nine of his restaurants in that state and Tennessee amid the financial fallout of the coronavirus pandemic, with a total of 300 staff now out of work through no fault of their own.
For Shemtov, who is now down to a skeleton crew of 10 employees at The Daily and is struggling to hold on, getting a loan from the federal government’s new $350 billion government-backed, low-interest loan program, known as the Paycheck Protection Program (PPP), means the difference between life and death for his business, a sentiment echoed by scores of small businesses across the country whose owners spoke with ABC News.
So far, the program’s rapid rollout has been plagued by problems, leaving cash-strapped small businesses in the lurch. And the industry estimates that half of small businesses could be out of business in two months and another third in three to six months, according to the National Federation of Independent Businesses (NFIB).
“I got an email from one bank saying that there's 42,000 people who have signed up to be notified when those applications will be opened,” Shemtov told ABC News. “So basically, what we have is a hot mess, which is not shocking, given the players involved. I think this is all very well-intentioned, but I think trying to put through a 350 billion dollar loan package in a week by nature is going to be very complicated.”
Out of five banks in Shemtov’s area, including SunTrust, Pinnacle and Wells Fargo, he said only one of them was able to accept and process his application right away when the PPP enrollment process initially opened, which is especially remarkable given that he has filed 10 applications.
The massive emergency loan program is designed to help small businesses with fewer than 500 employees rehire staff, make payroll up to $100,000 per year per person and pay operating expenses. And if the borrower adheres to the program, the entirety of the loan is forgiven. Others will have two years to repay the loan -- which amounts to eight weeks of a business' prior average payroll with a max loan of $10 million -- at a lower interest rate.
But even that interest rate has gone up since the PPP was created under the $2 trillion COVID-19 stimulus legislation.
In response to complaints from banks regarding loan disbursement, the Treasury Department upped the interest rate from 0.5% to 1% and is now giving borrowers 2 years to pay back those loans as opposed to the originally proposed 10 years.
“We've heard from some smaller community banks that their deposit costs -- even though the government is borrowing at three or four basis points," said Treasury Secretary Steven Mnuchin at a White House Coronavirus Taskforce meeting on April 2. “To make this attractive for community banks, we've agreed to raise the interest rate.”
There were also reports that the SBA’s online loan application process, known as E-Tran, was down for much of Monday, according to a senior banking industry source, who said one banker recounted to his group on Monday how the site was inoperable the entire morning.
A spokesperson for the SBA told ABC News Monday the system was "up and running” without addressing whether the site had been down for the better part of the day. "The system is up and running. We continue to process, approve, and guarantee billions of dollars of loans per hour," said SBA spokeswoman Carol Wilkerson.
Amazon Web Services was brought on over the weekend to create a new online portal through which more applications can be submitted, but it was unclear when that service would be operational, though many were hopeful it would relieve the increasing bottleneck in the system.
Substantial hurdles remain across the vast program, from general to technical, and experts say the sheer volume of the demand is sure to exhaust the current funding which would necessitate the need for another federal infusion.
A senior administration official confirmed to ABC News on Tuesday that the Treasury Department is poised to ask Congress for another cash infusion -- more than $200 billion -- to keep the program from running out of money. And Senate Majority Leader Mitch McConnell, R-Ky., said he was preparing to have the chamber approve the funding on Thursday, the next time the Senate is scheduled to hold a brief session with one member present to conduct any procedural business. If no member objects, the emergency legislation could pass quickly. The action would still need to clear the House.
Nearly 8,700 chefs, restaurateurs and workers from across the country joined leaders of the Independent Restaurant Coalition to call on Congress to take urgent new actions to help ensure their survival, including extending the program for three months after businesses reopen, creating a stabilization fund to help owners pay their vendors, and increasing the loan repayment period from two years to 10. Without these changes, the coalition warned, “the systemic impact will be unprecedented and gravely consequential.”
And while more people could apply for assistance as of Monday, many small business owners desperate for cash were unable to find a lender who would accept them because he or she did not have an existing relationship with the bank, even though the legislation that created the program did not include this requirement.
“The hurdles have not been removed,” said Karen Harned, executive director of the NFIB, which represents 300,000 businesses, many of them with fewer than 10 employees. “I only know of one of our members whose loan has been approved. We’ve not spoken to anyone who has actually received money.”
“The good news is, I feel like at least they’re getting on the radar of their banker, but I’m super worried about those who are not able to get a loan. I just wish more banks would participate,” said Harned.
The treasury secretary tweeted on Sunday that "over $1,800,000,000 #PPPloan now processed by @SBAgov mostly all from community banks. Big banks taking in large amounts but not yet submitted in these numbers!"
Many retail banks were accepting applications as of Monday, but Citibank was among the few large financial institutions that was not yet up and running. It’s PPP website still read, “While we are working as quickly as we can, Citi is not yet able to accept the loan applications for the new Paycheck Protection Program. We appreciate your patience.”
Wells Fargo opened its application site on Saturday, but the bank announced a day later that it had reached capacity.
“Given the exceptionally high volume of requests we have already received, we will not be able to accept any additional requests for a loan through the Paycheck Protection Program.”
The institution was limited in how much it could lend after a 2016 fraudulent account scandal.
For Joe Field, the owner of Flying Color Comics and other Cool Stuff in Concord, Calif., the Wells Fargo announcement was a blow.
“Last week I filled out the SBA.gov application, took it to Wells Fargo, and the Wells Fargo employees said that it would not be available on their site until sometime this week,” said Field, but by Monday, he said he was turned away by the bank.
“Kind of what you'd expect from a government program,” Field added. "I understand that everybody's going through this, but it would be nice if there was some clarity that would allow us to be able to do this in a way that, I don't know, makes good business sense ... Let's hope.”
Small business owners have also told ABC News that the application process, while simple at first, can quickly become bewildering.
“The confusing part of this process really breaks down to this: The SBA is saying things will work one way, and the banks want things done their way,” said Field, adding, “The forms are relatively easy, but getting to the finish line is proving to be a real challenge.”
Larry Shulman, who owns a home audio/visual technology company in Massachusetts that employs 13, said the Bank of America application asked him to report his payroll, but he was never asked how much he needed for rent or utilities, which are also meant to be covered under PPP loans.
"They don't even give you a loan number when it accepts. They don't give you an email. It’s as if we did nothing. So you don’t know where it is or when it went in," Shulman said.
For Jeffery Norwood, owner of a camera shop in Long Island, New York, the application process with Chase Bank was “very simple,” but it's a little deceptive, because in reading other information...the hard work is afterwards, I found out. You have to file quite a few informational forms from the SBA and from the IRS, and you have to have all your ducks in a row, but you have time to do it.”
Despite this widespread confusion and exasperation, President Trump on Monday said the program was working well.
"Couple of little glitches, minor glitches that have already been taken care of," Trump said, adding inaccurately that Wells Fargo was now taking applications.
When a reporter said that Wells Fargo has stopped taking applications, Trump replied inaccurately, "Not anymore they haven't.”
But it was not all bad news for the infant program, begun on Friday. There were some signs of improvement in PPP after the weekend. More banks were accepting loan applications and some had funded those loans.
“The majority of CBA members are now taking applications and some are already funding loans,” said Nick Simpson, Senior Vice President of Public Affairs for the Consumer Banking Association. We expect both those numbers to go up in the coming days as banks continue working around the clock to get this new program firing on all cylinders for small businesses and as we continue to work with SBA on receiving additional necessary implementation guidance.”
Simpson said CBA, which represents scores of retail banks, still estimates that the PPP should be fully operational by mid-week.
One of the first banks to stand up its program, Bank of America, was walloped by criticism, at first, that its narrow prioritization process of existing customers left out many of its own small business clientele.
As a result, the bank announced over the weekend in a tweet that while it had “helped 122K Small Business clients apply and taken in more than $27 billion in applications,” it would make a change, tweeting, “We have expanded the process to address the needs of a larger group of Small Business clients.”
ABC News' Benjamin Siegel, Briana Stewart, Victor Ordonez and Matthew Vann contributed to this report.