Congress sent another $320 billion to a wildly popular, quickly depleted COVID-19 loan program Thursday, though it’s a long shot the Glenwood Dance Studio in East Rogers Park will get any of the cash.
Sandra Verthein, the dance center board president, said she was told by Chase, the dance center’s bank, that there were at least 100,000 applicants ahead of her.
A sign on the closed storefront studio near the Morse Avenue L stop on the Red Line says, “We hope to be dancing with you ASAP,” but based on Verthein’s experience, the PPP dance could be called freestyle frustration.
After President Donald Trump signs the bill, the new money will replenish the Paycheck Protection Program — known as PPP — created to give small business and nonprofit employers a financial lifeline as the economy melts because of the coronavirus lockdowns. The original $346 billion appropriation was exhausted in two weeks.
Verthein’s quest to get a coveted PPP loan for the nonprofit studio, at 7017 N. Glenwood Ave., unfortunately is emblematic of many frustrated employers and self-employed contractors — and is an example of a well-intended program that worked for some and likely may not for others. That is, unless Congress adds a third round of funding.
There is soaring demand for the loans because if used as intended, to meet payrolls and pay some operating expenses, it does not have to be repaid.
The dance center banks at Chase. The account is too small to be connected to any personal banker.
Verthein submitted an application on April 9, three days after Chase opened its PPP website, requesting a very small loan, $5,750. That represents payments for 2.5 months to the 10 part-time dance instructors. She lost a few days because of difficulties applying online.
The Small Business Administration stopped taking applications April 16, after approving loans for the entire $346 billion appropriation.
On April 19, Verthein got an e-mail from Chase, which she shared with me. Chase noted the PPP funding was exhausted. Even if more came through, “We want you to know there are more than 100,000 applications ahead of you at Chase, based on when you submitted your inquiry.”
At 7:45 p.m. on Wednesday, Chase sent Verthein another e-mail in anticipation of Congress on Thursday approving a second round of funding for the PPP. However, Chase said, “We expect that funds could run out again quickly.”
The dance center’s application was still at the first stage and never was even sent to the SBA for review.
“We know how important these funds would be to your business. We wanted to give you this information, so that you can decide if you would like to try applying with another lender,” the Chase e-mail said.
Verthein and I talked about the recent stories revealing how banks gave special treatment to its better customers, even if the official line was “first come, first served.”
The banks play a crucial role, since the SBA depends on the banks to submit the PPP applications and put up the money. Banks determine who gets help in swiftly completing and submitting an application. That gives the lenders considerable sway over PPP distribution. The banks get a fee for their work — a percentage of the loan.
The new funding is $310 billion for loans plus about $11 billion for administrative fees.
Verthein told me, “My feeling is if we are that far down the line for someplace we applied on April 9, what’s the point of doing an application now with some other bank where we will be further down the line?”
The Senate on a voice vote Tuesday, and the House via in-person – but socially distanced – voting Thursday approved the additional PPP loan funding as part of a $483 billion coronavirus funding package.
Of the Illinois House members, 4 Republicans and 12 Democrats returned to the Capitol and voted yes. Not voting were Rep. John Shimkus, R-Ill., and Rep. Dan Lipinski, D-Ill. Lipinski said in a statement that as a type-1 diabetic, his doctor advised him not to travel.
Rep. Jesus “Chuy” Garcia, D-Ill., told me he believed banks “pushed through their favorite clients.” Rep. Adam Kinzinger, R-Ill., said there were problems in part because Congress and Trump wanted the money out the door fast. “To think through all the nuances and details and questions probably would have taken longer than we had,” he said.
The new legislation fixes some of the favoritism issues by setting aside $60 billion for community banks and other smaller lenders, including qualifying “minority depository institutions.”
But it doesn’t help Verthein if the newly filled well will soon be dry.