Last week, the Brooklyn Chamber of Commerce had some good news to share about the federal small business aid known as the Paycheck Protection Program. A majority of Brooklyn businesses that applied—92%—received a PPP loan by the second round of funding. The finding came from a survey the chamber conducted with 600 business owners across all industries, regardless of whether they were members of the chamber.
Anecdotally, those numbers align with the stories I’ve heard from other entrepreneurs who finally received the PPP loans they applied for in April. This time around, your relationship with your bank or its size didn’t really matter, as even big banks like Chase facilitated loans to small businesses of all kinds, from Inner Force, an early childhood learning center serving 400 children in East New York and Brownsville, to the popular pie makers, Four & Twenty Blackbirds, in Gowanus.
As promising as that sounds, the devil is in the details. Currently the PPP loans will only be forgiven if 75% is spent on maintaining your payroll for 8 weeks from receipt. Given that many NYC businesses still remain closed without any specific, sanctioned date to reopen, it makes little sense for them to spend the money this way when it can be better applied toward rent.
In an interview with Brooklyn Chamber of Commerce President Randy Peers, he detailed the ways the chamber is working to get those restrictions changed, its new Bring Back Brooklyn fund, and why, despite this promising news, a large percentage of businesses in Brooklyn will not survive the pandemic.
What was instrumental for Brooklyn businesses in getting PPP money in this second round of funding?
Number one, the community development financial institutions, CDFIs, of which New York has some really good ones and big ones, they didn’t participate round one, but they participated in round two because the SBA made direct allocations to the CDFIs, so they had capital to work with. CDFIs traditionally work with Minority and Women Owned Business Enterprises [MWBEs] and other under-banked communities, so that was a big plus. The second thing is…banks, they kind of got the message. There was some bad PR, a lot of the big banks structured their loans around larger companies with existing relationships with the bank themselves. Whereas in round two, they got the message and they were much more responsive to the small businesses. The third thing is if you look at the survey results, 22% of the businesses said they got financing through someone other than a bank or a credit union or a CDFI. Those were actually the Fintechs. So the financial tech companies, like the PayPals, got into the game as well. And they gave the businesses another option to seek these loans. So those three things just really changed the name of the game in terms of processing applications and getting money out the door.
So these Fintechs like PayPal and BlueVine had the same capacity to give out these PPP loans?
I know you’re pushing for changes to terms of the loan forgiveness and sanctioned expenses of the PPP program, like extending the rehiring period and allowing businesses to apply more of the money to rent. Who are you lobbying specifically?
Working with the Brooklyn delegation to Congress—Congresswoman Nydia Velazquez, Congresswoman Yvette Clarke, Congressman Max Rose, Congressman Hakeem Jeffries, Congressman Jerry Nadler, and Congresswoman Carolyn Maloney—and New York’s Senate delegation, Senator Schumer and Senator Gillibrand, is really where we are looking in terms of this type of advocacy.
And they’ve been receptive. We’re looking at another round of stimulus and the Democrats in the House have already proposed a bill, the HEROES Act, and included with that are changes to the existing Paycheck Protection Program. The Senate has to negotiate any type of a stimulus as well as changes to existing programs, so we can’t say what the timetable is, but we’re hopeful that some of these very common-sense changes could be adopted so that the program itself is much more responsive to New York City businesses.
Do you think that either the city or state government, or even the banks themselves should play a part in this, say by canceling commercial rents?
Well, so that’s a much more complicated issue. The data shows that there’s clearly a disconnect between commercial tenants and commercial landlords. 44% of respondents in April [in] our first round of surveys said they missed April’s rent. And only 16% of the respondents indicated that they received any type of concession from their landlord. So you can see that there’s a big disconnect between 44% who said, “Hey, I can’t pay my rent” and 16% of landlords that said, “It’s okay, here’s a concession.” In May, the second time when we asked the same question, 46% said they missed May’s rent payments—that was pretty consistent—and we had 21% say their landlord offered some type of concession. So we’ve got a definite challenge here between what commercial tenants need and what commercial landlords are willing to do because landlords have obligations too, and many commercial landlords in Brooklyn are smaller landlords. They have a couple of properties. They’re not big mega landlords or big conglomerates. So they’ve got mortgage payments to make, they’ve got property tax payments, and they’ve got other obligations. So it’s not just a simple, “Hey, let’s suspend rent payments” because if we do that and we don’t provide some sort of a balance or offset for the landlord, they’re going to be in financial trouble. So it’s not a simple kind of yes or no type of thing.
Is there any thought or work in progress to lobby the banks to relieve those landlords of their obligations temporarily?
We’ve also had a moratorium on evictions, right? So you can not pay your rent and you won’t get evicted, at least now between now and August when it is supposed to expire. So I think the question you’re asking me, is can’t the banks lend a hand here and offer to suspend mortgage payments or cover mortgage payments, maybe even for that period. It’s the same kind of issue. If the banks are doing that, then they get into a financial situation and so across the board somebody is going to get hurt if we suspend anything without some creative solutions that I’ve heard and things that we could get behind.
First off, for landlords that offer rent concessions, they should probably be allowed to apply for a property tax abatement, right? In that case who loses out on the revenue? Well, the state does, the city does. So somebody still takes the haircut, but I think that is a proposal that the chamber has heard and would make sense because if you think about it, property taxes are usually passed on to the tenant anyway. So if a landlord can get a property tax abatement, they’re in essence, just passing the savings along to the tenant who would have covered that payment anyway. So that is something I think represents a compromise. It doesn’t make anybody whole, and it doesn’t address the entirety of the problem. But I think it’s a good start.
Is the chamber itself in any danger financially?
So fortunately we have not had to lay anybody off yet, and we’ve managed to sustain ourselves on some government contracts which we still continue to do work on. The chamber has two corporations. We have the chamber which is the 501c6, which is our membership organization. And we have the Brooklyn Alliance which is our economic development arm. The Brooklyn Alliance has pretty good government contracts…
On the chamber side, as you can imagine, the last two months, we haven’t seen the level of membership revenue that we would expect, and our events revenue is pretty much nonexistent. So clearly we are feeling a financial constraint there. And the big issue was the fact that the chamber, the 501c6, didn’t qualify for PPP because…only 501c3s were allowed to apply.
So where we needed the help, which was on the chamber side, which is where we’re losing revenue on membership and events, we actually couldn’t apply for a PPP. One of the other changes that chambers [of commerce] nationwide have been asking for is that they allow C6 organizations to actually qualify. My understanding is the Democrats wrote that change into their proposals. So that would be good. Now we just have to see what the Senate side has to do.
And what about rent? How is that going?
So we’ve got two locations. One of them is 9 Bond Street, which is actually covered by our city contract, our Business Solutions Center contract, so we didn’t have any worries there, but in terms of our main offices, Adam Street, we met our rent obligation so far. Our rent continues to accrue and we’re not getting as much revenue right now. So we, like most other small businesses, are feeling the challenge around the issue of rent.
You created the Bring Brooklyn Back Fund to help small businesses, primarily those that are women and minority-owned, and have raised almost $200,000 to date. Do you have a goal to raise more money for these no-interest loans?
The goal is $500,000. We’re off to a good start…We had $125,000 in hand because we got a grant from the US Department of Treasury in December. We had a couple of corporations step up and make sponsorship contributions, including AT&T and Investors Bank. So we’re thankful to our corporate contributions, but the rest, most of it has come from small individual donors.
This is the way everyday Brooklynites who care about their neighborhood small businesses can contribute to the recovery and see these places survive. These businesses we use every day and what make our neighborhood special. They’re your cleaners and they’re your bars and your restaurants and they’re your barbershops and they’re your pharmacy, they’re your retail shops. I mean, it’s everything that we use every day in our neighborhood and we care about. Maybe all these years we just took it for granted. The dry cleaner was always there and he was always a friendly face and always served us really well. Well now, we run the risk of a third or more of our businesses not coming back, unless we can step up as community-minded people and save these businesses. That’s what this Brooklyn fund is about.
Speaking of the third of businesses projected not to reopen—do you know the specific reasons why, and the industries that they’re in, or is this just across the board?
It’s across the board. The one thing a lot of them have in common is that they’re small businesses. So, there are 63,000 businesses in Brooklyn. 84% have less than 10 employees. So we are a small business economy. A lot of these businesses, your mom and pops, a lot of them are minority, women, and/or immigrant-owned businesses. I mean, these are the types of businesses that make up our neighborhoods…A lot of them are the nonessential businesses that were forced to shut down. There are some businesses that are still functioning and still doing okay, like grocery stores, for example. I mean, clearly they have stepped up and they’re heroes in some respects because now the workers at the supermarkets and the grocery stores, they go to work every day and make sure we have food on our table. Some of our restaurants have tried to make a good go at delivery and takeout, but most of them are reporting that they’re only drawing about 30%, at most, of previous revenue. So, they’re going to need to get back to some type of in-house dining in order to restore that revenue.
But everything else, all the non-essentials, had to close down completely. Your barbershop, your hair salon, your cleaners, your retail dress shop, your vinyl records store in Williamsburg. I mean, all these places, they’re all at risk and a lot of it will depend upon: Do they have reserved capital, and what type of government funding did they pursue? Did the landlord work with them and kind of give them some concession? But a lot of them were just living from week to week and those are the ones that are going to be in trouble.
What do you think Brooklyn will look like if a third of these businesses don’t reopen?
We’re going to lose a little part of ourselves, a little bit of our soul. And that’s the sad part. This is the part where I get emotional, but I grew up here, born and raised. I spent all of my life here with the exception of two and a half years…in Pennsylvania. I’ve always worked in Brooklyn. I’ve lived in five different neighborhoods. Every one is special. Every one of them is unique and what makes them special and unique in many cases is the small businesses. And it’s the generations of different immigrants that have come here and have become entrepreneurs, and…taken risks and done creative things. I lived through Brooklyn in the 70s when this was a much different place, and it took us a long time to kind of recover from that economic challenge.
But when we came back, in true Brooklyn fashion, with grit and with persistence, we shaped this place to be the special place it is. And you’ll lose some of that of course, but I’m optimistic. I think we’ll bounce back. I think you can quarantine us, but you can’t break our spirit and our spirit will come back, and we’ll be shining brighter than ever when this is all over, but we’ll look a little different for sure.
This interview was edited and condensed for clarity.