$10.5B in PPP loans went to 84,000 LI businesses, nonprofits

More thn 84,000 businesses and nonprofits on Long Island received a total of $10.5 billion in loans via the federal government's marquee pandemic-relief initiative, the Paycheck Protection Program, according to a Newsday analysis of new data.

The PPP was launched to provide employers with the funds to keep workers on the job or to rehire them as the U.S. economy was shut down in March 2020 to slow the coronavirus' spread. Small businesses and their advocates criticized banks and other private lenders for initially helping big corporations and publicly-traded companies to snap up multimillion-dollar loans.

The situation improved in 2021, the PPP's second year, as lenders increased the number of small loans to 77% of the total on the Island, a sign that more aid was directed to mom-and-pop businesses, the analysis shows.

'The numbers shifted toward the little guy.'

-Eric Alexander, founder of the LI Main Street Alliance

"There was a harsh inequity that occurred in the first weeks of the PPP, when loans were going to the wealthy and not reaching the people that needed them the most," said Eric Alexander, founder of the LI Main Street Alliance, which represents 45 downtowns that are undergoing revitalization. The alliance, together with chambers of commerce, helped educate small business owners about the relief program.

"Congress and the [U.S. Small Business Administration] made changes to fix the PPP and everyone redoubled their efforts to assist small businesses," Alexander said. "The numbers shifted toward the little guy. There was progress, not perfection" by the time the program closed in May 2021, he said.

Bigger impact in 2021

The PPP had a bigger impact in its second year on 32 low- and moderate-income communities, including Brentwood, Copiague, Hicksville, Glen Cove and Riverhead. Borrowers in those communities received about 12,800 loans in 2021, or nearly a quarter of all the loans made in the region that year, compared with about 9,550, or just 15% of the total in 2020, according to the analysis of data obtained under the Freedom of Information Act.

One Glen Cove-based nonprofit, SCO Family of Services, received a $10 million loan, the program's maximum. 

“If we hadn’t gotten this bailout, we probably would have cut programs and services – and that means cutting staff at a time when our clients needed us more than ever,” said Keith Little, president and CEO of SCO, which cares for children, the homeless, those suffering from substance abuse and the developmentally disabled. The agency operates group homes and day programs.

“We were in panic mode when we applied for the PPP loan last year,” he said. “We had shortages of staff. … We needed to keep people and to reward them for being willing to work where there were high infection rates.” 

The nonprofit, founded in 1895, has more than 3,000 workers on Long Island and in New York City. 

While SCO's loan was among the largest in Nassau and Suffolk counties, more of the area's smallest businesses also received help in the PPP's second year: 77% of loans made in 2021 were under $50,000, compared with 66% in 2020.

The size of the loan was determined by the number of employees; a $50,000 loan indicates a business with fewer than a dozen employees. One in five loans made over the two-year period was for less than $10,000, the analysis shows.

The loans were forgivable — that is, they could be turned into grants — if the money was used principally for payroll and certain other conditions were met. If borrowers don't qualify for forgiveness, the loans, carrying a 1% interest rate, must be paid back in two to five years.

Three quarters of the PPP loans made on Long Island had qualified to be forgiven as of April 4, according to the analysis.

The PPP reached a more diverse group of borrowers after Congress and Presidents Donald Trump and Joe Biden set aside federal loan guarantees and exclusive application-processing days for the smallest businesses and those owned by minorities, among others. More sole proprietors and independent contractors with no employees also became eligible for aid.

Second loans for some

While 84,000 establishments received PPP loans, more than 120,500 loans were made in Nassau and Suffolk because 36,500 borrowers qualified to receive a second loan.

Cord Contracting Co. in Woodbury, which specializes in interior construction, received the most: the $10 million maximum for its first loan, plus a second loan of $2 million. The company had 272 employees when it applied, records show.

Another contractor, Island Acoustics LLC in Bohemia, was No. 2 with two loans, totaling $10.4 million.

Ten other large employers each secured $10 million loans. They include the Developmental Disabilities Institute, New York Health Care, Newsday Media Group, Sam Ash Music, Summit Security Services and Whitsons Food Service. 

However, some businesses and nonprofits didn't benefit from the PPP because it closed before their loan application could be processed, they lacked payroll records and other documents or they threw in the towel when the first bank turned them down.

"A lot of smart people didn't know about this program or applied too late," said Stephen Schwartz, a senior consultant at the financial advisory firm Asset Enhancement Solutions LLC in Uniondale, which helped borrowers to navigate the process. "A lot of people gave up when the financial institution wouldn't give them a reason for rejecting their loan application."

'All you had to do was Google ‘PPP’ to find a lender to assist you.'

-Neil Seiden, president of Asset Enhancement Solutions LLC in Uniondale

Still, the increased participation of online-only banks such as Kabbage in the PPP last year helped businesses that lacked a years-long relationship with a lender or had a checkered credit report, according to Neil Seiden, president of Asset Enhancement. He said the company helped to secure 1,500 PPP loans valued at $150 million for clients in 35 states.

Online banks "made it a lot easier in 2021 because all you had to do was Google ‘PPP’ to find a lender to assist you,” Seiden said. “Also, SBA increased the minimum fee that a lender could make on a PPP loan, so a lot of [online lenders] saw there was a huge amount of money to be made…Banks began taking everything; it didn’t matter how small the loan amount was,” he said.

Even with more lenders participating last year, the process of securing a PPP loan still took weeks, and in some cases, months.

'The PPP loans helped me to maintain my staff  ... I would be struggling if I hadn’t received the government support.'

-Alan Bernstein, owner of Hand & Stone Massage and Facial Spa in Hewlett

Alan Bernstein, owner of Hand & Stone Massage and Facial Spa in Hewlett, said he tried five times to submit a PPP application online to his bank, JPMorganChase, with no success. Citibank turned him down.

Finally, Bernstein was approved by Northeast Bank in Lewiston, Maine for a $103,565 loan in February 2021 and received a second loan three months later for the same amount. Both loans have been forgiven, he said.

“The PPP loans helped me to maintain my staff, to give them extra pay as they worked through the pandemic,” said Bernstein, who employs about 25 people in the business that he opened in October 2015 after years of working in information technology for large banks. He had hoped the spa would turn its first profit in 2020.

“I would be struggling if I hadn’t received the government support,” Bernstein said. “Instead, I’m back to where I was before the virus and looking at ways to expand my business.”

Did PPP loans reach more minority businesses in 2021? Leaders are divided.

Elizabeth and Antonio Wellington credit a $20,833 Paycheck Protection Program loan with helping to keep their Elmont trucking company going during the pandemic.

Wellie The Transporter LLC secured the PPP loan last year from Customers Bank in West Reading, Pennsylvania. The loan was forgiven in December because a majority of the funds went to pay employee salaries.

The minority-owned business, with a staff of three, received help from the federal government’s flagship COVID-19 relief program amid a 2021 push by Congress and the White House to get more loans into the hands of the smallest businesses, those owned by women, veterans or members of minority groups and those located in poor neighborhoods. The politicians were responding to criticism of banks and other private lenders for concentrating on loans to big corporations and publicly-traded companies in 2020, the PPP’s first year.

Local groups that represent minority entrepreneurs are divided over whether the push was effective in helping businesses in their communities to survive the pandemic.

Minority business owners got funding this time around and it helped them stay afloat.

-Elizabeth Wellington, vice president of Wellie The Transporter and an officer in the Long Island African American chamber

"There was a big difference in 2021 compared with 2020,” said Elizabeth Wellington, vice president of Wellie The Transporter and an officer in the Long Island African American Chamber of Commerce. “Minority business owners got funding this time around and it helped them stay afloat, it made a difference for the community.”

She said the 300-member chamber assisted 220 businesses in applying for PPP loans last year by organizing educational webinars and building a relationship with Customers Bank. She said “many more” Black-owned firms in Nassau and Suffolk counties secured loans in 2021 than in 2020.

Not so among Hispanic-owned companies, according to Luis Vazquez, president of the 300-member Long Island Hispanic Chamber of Commerce.

'A few of my members got [the loans] but a lot of them were afraid.'

-Luis Vazquez, president of the Long Island Hispanic Chamber of Commerce (Photo credit: Newsday/J. Conrad Williams Jr.)

“I didn’t see a big difference…A few of my members got [the loans] but a lot of them were afraid because they didn’t have all the documentation and the process [of applying] was pretty difficult,” he said.

Data on the number of PPP loans made to minorities, women and veterans is not available because lenders weren't required to collect demographic information on borrowers.

But the data does show that many more loans were made in 2021 than in 2020 to businesses and nonprofits located in Long Island's majority-minority communities.

For example, 460 PPP loans were made in Central Islip in 2021 compared with 292 in 2020; 1,312 loans in Elmont compared with 512; 479 loans in Roosevelt compared with 124, and 257 loans in Wyandanch compared with 98.

In 9 out of 10 communities where at least 80% of the population are members of minority groups, many more loans came last year than in 2020.

In addition, more PPP loans were under $150,000 compared with 2020, a sign that smaller businesses were getting more help, according to a Newsday analysis of SBA data obtained under the Freedom of Information Act.

Asked about the PPP’s impact on minority- and women-owned businesses in the two-year period, SBA administrator Isabella Casillas Guzman told Newsday, “96% of the PPP in 2021 has gone to the smallest businesses with 20 or fewer employees – that’s where we have an over-indexing [high representation] of women- and people of color-owned businesses.”

Disparate treatment of white and minority borrowers by bank employees was an issue in 2020.

An investigation of 17 Washington, D.C.-area lenders, conducted April 27-May 29, 2020, found white applicants for PPP loans were treated better than Black applicants 43% of the time, according to the National Community Reinvestment Coalition.

Using Black and white matched-pair testers with equivalent qualifications, the advocacy group found white customers were told more frequently that they would qualify for a loan and not one Black woman was told she would qualify.

'I feel as if we did better in the 2021 round because we knew what to do.'

-Zeshan Hamid, owner of Shaheen Caterers & Event Planners and chairman of the New York South Asian Chamber of Commerce (Photo credit: Jeff Bachner)

By James T. Madore

james.madore@newsday.comJamesTMadore

James T. Madore writes about Long Island business news including the economy, development, and the relationship between government and business. He previously served as Albany bureau chief.