Coastal businesses see little help from stimulus

04/29/2020

Federal assistance has not yet materialized for most West Marin employers looking for financial relief. In a poll of 20 business owners who applied for a forgivable loan under the nation’s Paycheck Protection Program, only two said they have received money, the Light found.

In the midst of widespread layoffs and plummeting income, the only bank on the Marin coast, Wells Fargo, closed its doors and advised applicants to seek a loan through a different financial institution. Local business owners are angered with the bank, one of three large banks facing a class-action lawsuit for prioritizing large loans over small loans in the early days of the program.

The Paycheck Protection Program, which essentially gives businesses and nonprofits free money as long as the funds are used to pay employees, rent, mortgages or utilities, has attracted hundreds of thousands of applicants. The initial $349 billion in loans, administered by banks and funded through the Small Business Administration, ran out in just 13 days, so the federal government allocated another $310 billion, which became available on Monday. 

A breakdown of how much money Marin businesses have received is not yet publicly available.

The program would normally take months or even a year to roll out, accountant Mark Mumm told business owners in a workshop hosted by the West Marin Fund and the local chamber of commerce last week. Adding to the challenge, banks have sent home many employees, and some have never worked with the S.B.A.

“Many of these banks are just overwhelmed by the volume of applications they are getting,” Mr. Mumm said. “Based on what they’re trying to do, it’s not surprising that it’s bumpy, and it will probably continue to be bumpy.”

But for businesses facing uncertain futures, patience doesn’t come easy. Kevin Lunny, who owns West Marin Compost and Lunny Grading and Paving, says his grading business, deemed non-essential, is “on a fairly steep path to the ground.” He’s still paying to maintain and insure equipment and for health care for roughly 20 employees.

“This is not a ‘woe is me’ problem,” he said. “But because we have such a capital-intensive business, the dollars that we lose on a daily basis is staggering… We don’t think we can survive this. We are hanging on because of the hope for some help.”

Aaron Ely, the owner of Point Reyes Vacation Rentals, said he filled out a request to submit an application at 6 a.m. on April 3, the day the program opened. He completed the request by 6:15 a.m., and for the following two weeks all he received were automated emails from Wells Fargo telling him that he was in their queue, and that he might try a different financial institution. 

By the time he could submit an application, the first round of funds had dried up.

Mr. Ely said he has been banking with Wells Fargo for over 15 years because it’s the only bank in town and the staff is great. Now, he will be boycotting it.

“They’ve shown me they don’t care about me, my business, my family, my staff or our community,” he said. “I sincerely hope that in the aftermath of this, we all boycott Wells Fargo so that they close this branch, and hopefully a more ethical bank, like Redwood Credit Union or Bank of the West, will take over in the same building.”

Celine Underwood, the owner of Brickmaiden Breads, also requested an application with Wells Fargo when the program debuted, but the money was gone by the time she was allowed to apply. Luckily, she’s been able to keep selling her baked goods at farmers’ markets, and she was granted mortgage relief and a $10,000 Economic Injury Disaster Loan directly from the S.B.A.

The Point Reyes Light applied for a loan first with Wells Fargo, where the business banks, and then with Redwood Credit Union, where the owners have personal accounts. A $28,000 loan came through Redwood last week, creating a new business account separate from the Wells Fargo one.

With multiple advertisers cancelling ads, the profitable Western Weekend issue in doubt, and a summer advertising uptick unlikely, the need for a forgivable loan is significant. Three-quarters of the newspaper’s income comes from local advertisers, most of which are heavily impacted. 

“With luck, the loan will cover the loss in advertising,” said David Briggs, a co-owner. “It’s been a lot of work to get set up, but it’s well worth the effort.” 

The Point Reyes Farmstead Cheese Company is another one of the lucky few to receive the forgivable loan. “It was kind of a miracle that we actually got the funding,” chief financial officer Diana Hagan said. 

Like Point Reyes Vacation Rentals, Brickmaiden and the Light, the cheese company initially applied with Wells Fargo, to no avail. Ms. Hagan then applied through other institutions, like Kabbage, Cross River Bank and PayPal, bringing her total applications to four. Last week Cross River came through. The loan will be used to support employees who were laid off or had their salary reduced, Ms. Hagan said.

Loan amounts under the Paycheck Protection Program are calculated based on a company’s average monthly salaries. The money must be spent over the course of eight weeks, and in order to be forgiven, 75 percent must be used to pay employees. Full-time employees who were laid off must be hired back, and loan forgiveness is reduced if the number of workers or salaries are decreased. 

Organizations in West Marin applying for the funds range from 140-employee institutions, like the Straus Dairy and the Straus Family Creamery, with around 140 employees, to one-man operations, like Miguel Alfaro Juarez’s construction and tree service company.

Sole proprietors and business owners can also apply for unemployment benefits, which are currently boosted by $600 by the CARES Act, or a disaster loan emergency advance, which serves as a $10,000 grant.

The Marin Small Business Development Center has served more clients in the last six weeks than it normally serves in a year and a half, director Miriam Karell said. The local S.B.A. partner has been offering free consultations to business owners, who have had very specific questions as they try to determine the best route forward. (To apply for counseling, visit marinsbdc.org.)

Wells Fargo

Wells Fargo was allowed to participate in the Paycheck Protection Program only after the Federal Reserve lifted a cap on assets that it had imposed on the bank in 2018 for widespread consumer abuses, including opening millions of fraudulent accounts and enrolling customers into online banking services without their knowledge or consent. 

In February, the bank agreed to pay $3 billion to resolve the investigation, which found that between 2002 and 2016, the company pressured employees to meet unrealistic sales goals, leading thousands of employees to defraud customers.

The company hasn’t been allowed to increase its assets over $1.95 trillion for over two years, until on April 8 the Federal Reserve announced that Wells Fargo could grow its balance sheet using the Paycheck Protection Program. The bank will donate all fees received under the program, spokesman Ruben Pulido said.

Last week, a class-action lawsuit was filed against Wells Fargo, Bank of America, U.S. Bank and Chase for allegedly prioritizing loans to large lenders. The lawsuit, which lacks a smoking gun specific to Wells Fargo, was filed on behalf of a frozen yogurt shop and an automotive repair shop in Southern California. 

As evidence, the suit compares S.B.A. data from the first 10 days of the program to data between April 13 and April 16, when the program ran out of money. The data shows that the proportion of loans over $150,000 was reduced in the last three days of the program, demonstrating that banks front-loaded applications for the largest loans, the lawsuit states.

“Wells Fargo prioritized those PPP loans that earned them the highest origination fees rather than processing PPP loan applications on a ‘first come, first served’ basis as required,” the lawsuit states, “In doing so, Wells Fargo enriched itself at the expense of American taxpayers, undercut the intent of Congress and the Senate, undercut the dollar-per-dollar effectiveness of the CARES Act itself, and caused irreparable harm to countless small businesses and workers who actually needed the temporary funding of the PPP loans to make payroll, retain their employees, and stay afloat.”

Mr. Pulido declined to comment on the lawsuit, but he wrote in an email, “Wells Fargo is devoting substantial resources and working hard to help as many of our customers as possible access PPP funding, regardless of size, in accordance with the program’s parameters.”

The Wells Fargo branch in Point Reyes Station has been closed since March 25. The bank shuttered about a quarter of its branches, based on historical branch traffic and the layout allowing for physical distancing.

 

Jack Truesdale contributed reporting to this article.