The Village Bank in Wayland, Massachusetts, where LaVana’s company has an account, initially said it could process her application, then told her it could not help her, because her company did not have a commercial loan. Other financial institutions told her that she needed an account with them to apply, or did not respond to her queries. She had finally managed to move forward with a small bank in western Massachusetts, before her own bank got back to her and said it would, in fact, be able to help.
The money would be enough to “keep the lights on,” she told me. One of the worst facets of the crisis, she feels, is that so many small businesses in her community are ailing together, and so many have not received help: “This is spiraling,” she said. “My ability to run my business allows my home day-care [provider] to get paid, and they’re also seeking a disaster loan. I want to support the businesses that sustain me, but I feel like I need support to do that.”
The problems with the relief package run far deeper than a flubbed rollout. For one, banks have been prioritizing applications from bigger clients; some have even developed “concierge treatment” options for wealthy firms. Even after some congressional fixes, the small-business plan, in that way, has helped big small businesses over small small businesses, and established small businesses over new small businesses, as the approval of loans to brand-name companies such as Shake Shack, Ruth’s Chris, the Los Angeles Lakers, Potbelly, and others has demonstrated. (Under public pressure, these companies have returned the funding.) Much of the help has gone to the companies that need it the least, among them firms with employee counts just under the SBA caps, franchises of major chains, and publicly traded firms, which are by definition able to raise money from investors. As structured by the federal government, “it was inherently regressive,” Khanna said.
Indeed, loans of $1 million or more soaked up half of the initial $350 billion allocated by Congress. Whiter, less populated states got more loan money per capita, with Vermont, North Dakota, and Minnesota overrepresented and Nevada, Florida, and California underrepresented. Researchers found no evidence that money went to the places and industries hit hardest, as measured by business closures and declines in hours worked. The accommodation- and food-services sector accounted for two in three jobs lost, but received just 9 percent of federal aid dollars.
The program is generating inequality in other ways too. One of the businesses that has applied but not yet received aid belongs to Jessica Yang’s parents, who sell sandwiches and groceries at a deli in Baltimore. The shop has closed, unable to make a takeout-and-delivery model work with no notice: The deli had no online presence before the shutdown, and services such as DoorDash and Uber Eats charge such large commissions that it would “never break even on an order,” Yang told me. The SBA was its only hope. “I heard that we would hear back in three to five days,” she said. “My parents keep calling me and asking if I’d heard anything. Then we read in the news that the program reached its limit. I wonder if that has anything to do with it. Maybe there’s just no money to go around.”