If you live in the U.S. and you own a small business or you're a freelancer who gets most of your pay through 1099's, have you applied for the Small Business Administration's Economic Injury Disaster Loan (EIDL) and the Paycheck Protection Program (PPP) loan?
If so, what are your results? I'd love to know.
I applied for EIDL when it first opened. I still haven't heard a thing. I just applied to PPP last week, and they've approved $2200. :( Not a lot of money. But it's something!
If you haven't applied, why not?
Next question just applies to women -- if you didn't apply for either programs, I want to know if anything below applies to you.
Because I read a study last week that's haunting me.
I normally don't write to one specific gender because I have clients who are both. However, this study needs to be talked about, explored and the results need to be turned around!
The study, done by Builders + Backers, Her Corner, Springboard Enterprises, and HelloAlice, surveyed over 300 women owners of small businesses. It found that women-owned businesses were passed over by America's biggest banks and the system either discourages women from applying or women owners tend to NOT apply at all...
↣ Repeatedly we heard from women business owners that they didn’t feel they should request the PPP loan because they had savings or “wanted the loans to go to smaller businesses that were really suffering.”
↣ In other cases, the women received mixed or errant information about whether or not they qualified and/or the information they would need to provide to apply. This discouraged them from even throwing their hats in the ring.
Let's take a look at the first statement above 👆.
Shake Shack and other well-known "small businesses" applied and got a $10 MILLION loan. They're now giving it back because they realized how it "looks" to the public. Shake Shack's 1st quarter revenues (January to March, 2020) were, reportedly, $143 MILLION! So, if they thought, "hey, we have less than 500 employees, so we should apply for the SBA Paycheck Protection Program," why wouldn't you, as a solo-preneur or even if you have a small but mighty staff of 5 or 10 apply for a loan?
Now, for those who did apply, about 15% either weren't able to submit the application fully because of all of the documents needed, turned away by banks or finished the application in the hours before it was announced the funds ran out.
So, now that the Senate and House approved another round of funding for small businesses, what are you waiting for? What's holding you back? I would recommend you apply now.
The study is a mirror for women-led businesses applying for loans, even in times of calm.
When women- and men- owned companies apply for credit at the same time, women-owned firms were less successful in getting financing.
And, they are more likely to be discouraged or choose not to apply for financing for fear of being turned down (22% vs. 15% of men-owned firms). If the percentage of businesses unable to submit applications holds at national levels, the economic impact is enormous. Because that means that approximately 3 million (23% of 13.1M) women-owned businesses that needed funding critical to staying open never even had a shot.
The next part of the survey, for me, shows the similarity between asking for higher pay, rates, and raises....
When women did successfully apply, they asked for and received less money than national averages despite evidence that women-owned companies are better investments for financial backers. According to the SBA 74% of PPP loans that were approved went to applicants that requested $150,000 or less. 4% went to applicants seeking loans of at least $1 million. However, women asked for significantly smaller loans than the average approved PPP loan. Women asked for $127,985 while the national average approved loan was $206,000. That’s 62 cents for every dollar average.
Sound familiar? In 2020, women make only $0.81 for every dollar a man makes. So, not only are women business owners not applying, but when we are applying, we're asking for less money?! Let's change that! Start with applying at a smaller bank because at eight of the nation's largest banks...
↣ Just 10% were approved versus 25% of all survey respondents.
↣ Five of the eight big banks didn’t approve any of the women in our survey. Sadly, this is wholly consistent with historical financing trends. While women-owned businesses have a general propensity to apply for financing at large banks rather than small ones (49% vs. 40%) they are actually more likely to be approved at small banks compared to large banks (67% vs. 50%) and to have the highest satisfaction levels at small banks (80%). Nearly all the smaller banks funded all their applicant(s)!
↣ WELLS FARGO and PNC BANK funded zero of the 15-20 companies that selected to apply through them. JPMORGAN (CHASE) was the most often cited bank, and they did an outstanding job of getting women into the front-end of the loan process. All but two of 54 women who tried to work with JP Morgan were able to apply. BUT, of the 52 women that were able to apply, 30 of them (57%) were never even asked for documentation after they submitted their application! Those businesses never really got past the front door and never had a fighting chance at a PPP loan. BANK OF AMERICA also did a better than average job of getting women into the process. 37 out of 41 respondents were able to submit an application, and 31 were asked for the necessary documentation to proceed. But abysmal communication was a consistent theme among survey respondents. 32 women were never notified of approval or denial and never got a communication from the bank about the PPP loan funds being exhausted. 27 received no communication at all. The rest describe endless loops of automated, nonsensical and contradictory emails with no possibility of human contact to resolve it.
Change Your Strategy!
Here are the suggestions from the survey writers. I didn't change much because it's all really good advice:
Stop waiting on the big banks to take care of you! For businesses that have not yet applied for the PPP or whose banks have continued to give them the runaround, look for a new solution while also staying in touch with your bank. If your bank still cannot take your application, consider applying through local banks.
Our survey respondents shared story after story of how they resiliently leaned into a chaotic process in pursuit of their PPP loans. They were proactive, rather than passively waiting. They called, they emailed, they worked their connections. 5% of them worked the process with multiple banks simultaneously to suss out their best strategy for beating the odds. These are unprecedented times and your business may be on the line. Roll up your sleeves and find your path(s) forward.
The new stimulus measure will allot around $60 billion to smaller financial institutions. Banks with $10 billion or fewer in assets will get half of that set aside. Smaller banks tend to make smaller loans, serve smaller businesses and act more nimbly than behemoth banks. Women-owned companies should refocus their PPP efforts on small and community-owned banks.
Banks are filling their queues now, fully expecting the second round of PPP funds may be depleted in as little as two days. If you’ve already applied, make sure your documentation is in. Reach out to your bank or credit union to ensure your application will be processed as soon as the PPP is open again.
If you aren’t sure if you qualify, are uncertain about which documents you’ll need to submit, or have questions about the process, don’t just opt out of the program. Get help. The good news is there are now over 1.6 million small business owners who have successfully navigated the PPP process you can learn from. And several organizations have turned round one of PPP inside out to see what worked for those that were successfully funded.
Share what you learn.
If every woman whose small business was approved for a PPP loan shared her tips for success with just four other women, every woman-owned business in the United States could have access to the insights that might help them succeed. We’re in this together so let’s help one another!
This Thursday, I'd love to help you apply for that PPP loan, answer any questions you have about managing your money during this pandemic and do a training on managing your money and mindset! It's free! Just sign up below so my team can send you the Zoom link as well as reminder e-mails.
With so much gratitude and love,