In the 17 years Irma Corado has run her international package delivery service, she had never asked any government agency for help. When her youngest son told her about a small-business county loan to help those affected by the coronavirus, she reluctantly agreed to apply.

“I was leery,” she said in Spanish, but decided to leave it “in God’s hands.” She hadn’t worked in more than two months, and her business rent and utilities were due.

The Harris County resident had reason to be doubtful. Corado said she struggled with and did not complete an online application for the Small Business Administration’s Paycheck Protection Program, or PPP. She got to the point where the system asked about payroll, she said, and because she uses the money-transfer tool Zelle to pay her salary, she didn’t think she qualified.

The PPP has approved nearly 4.5 million loans worth about $500 billion, but it continues to leave out many business owners who don’t have an accountant on speed dial, are not computer savvy, lack the language skills to navigate the banking system or opt not to try. That has particularly affected very small businesses and those owned by people of color.

The SBA acknowledged that established businesses “knew how to work the system” to get the loans, but mom-and-pop merchants were always at a disadvantage because they lacked the resources to quickly tap into that capital.

“We are the advocate for the underdog, the smaller business that doesn’t know that these resources are available, we are doing the best we can, we only have 14 on our staff,” said Charles Abell, a spokesman for the SBA’s Houston district office, which oversees 32 counties in Southeast Texas with 600,000 small businesses.

That’s one employee for 42,000 small businesses.

In an unprecedented move, local governments across Texas have rushed to fill the void.

They have poured millions of taxpayer funds into a patchwork of loan and grant programs to help small merchants that are a major driver of the local economy and tax base. Unlike the federal program, these local efforts have far fewer hoops to jump through. Applicants don’t have to show proof of payroll, as there are no restrictions on how the money can be spent as long as it’s tied to the business. All they need is to be in good standing with their property taxes and located in that jurisdiction.

The demand for the loans has been overwhelming. In just 28 hours, Harris County, the third-largest in the country and home to Houston, received more than 7,000 applications requesting $150 million in April. Only $10 million was available, taken from the county’s rainy day fund.

Meanwhile, the string-laden federal PPP program still has an untapped $120 billion.

“The federal government is so far removed from the local community that it didn’t think about, and it can’t think about, simplicity,” said Harris County Commissioner Adrian Garcia, who spearheaded the county’s loan program.

“My charge to my staff was to keep it simple,” he said. “We got to make this easy to apply for and user friendly.”

There are 2.7 million small businesses in the Lone Star State, according to the SBA, and about 40% are owned by people of color, among the highest rates in the nation. In Harris County alone, there are more than 90,000 Hispanic-owned businesses.

The key to recovery in many towns in Texas and across the country is small businesses, local leaders and experts say. But nationwide, nearly 7.5 million may be forced to close over the next five months, according to a survey by Main Street America, a program of the National Trust for Historic Preservation.

“It’s a ripple effect, small-business owners generate revenue for the state, employ others in their community who utilize that money to put food on their table,” said Janie Barrera, CEO and president of LiftFund, a Texas community development financial institution working with some of the local governments.

“When forced to close their doors for health and security reasons, that economic activity is paused or lost,” she said.

Swift Fallout

The economic fallout from the COVID-19 shutdown coupled with the crash in the oil and gas industry continues to reverberate. More than 2 million Texans have filed for unemployment relief since mid-March. Sales tax revenue in the state dropped about 13% in May, the largest year-over-year decline in a decade.

Before COVID-19, “there was a thriving economy of first-, second-generation folks running small entrepreneurial shops, paying their bills, feeding their families, but not necessarily in the banking system,” said David Marquez, executive director of the economic development department in Bexar County, which allotted $5.25 million to a loan and grant program.

Many are self-employed or only employ one or two people. Like Corado, they might rely on a son or a neighbor to fill out their loan applications. They are the type of owners who might not have the time or fit the mold to readily apply for federal loan programs.

“By the time they even began figuring it out, other people had accountants, lawyers, bankers pushing them through the process, and our folks were stuck out,” said Laura Murillo, president of the Houston Hispanic Chamber of Commerce.

An April report from the Center for Responsible Lending found that about 90% of businesses owned by people of color “stand close to no chance of receiving a PPP loan through a mainstream bank or credit union” for the reasons the local Texas officials cite: a lower likelihood of having a relationship with banks, a lack of digital skills, a distrust of government. The center was started with support from the Sandler Foundation, which provided most of the original funding for ProPublica and remains its largest donor.

A federal watchdog concluded last month that the SBA failed to direct private lenders to prioritize businesses in rural markets and those owned by people of color and women, as Congress intended. It didn’t require the collection of demographic information either, which means the agency won’t be able to know whom the loans went to.

Since the Inspector General’s report, the SBA started to do webinars about the program in multiple languages, which some offices in Texas were already doing, according to Abell.

He said they are working with other groups including chambers of commerce to spread the word that there is still funding available, along with other resources small-business owners can apply for, and to encourage them to reach out to their local SBA office for help.

The pandemic is “accentuating the problem of why we should pay more attention to those small businesses from the standpoint of access to capital,” said Al Salgado, executive director of the South-West Texas Border Small Business Development Center. “We need to really take a look at ourselves introspectively and look for those gaps, the cultural gaps, location gaps, high-risk areas.”

A Bumpy PPP Rollout

Initially, Congress approved $349 billion to help small businesses, those with 500 employees or fewer, to help keep employees on company payroll and off unemployment.

The money was gone in two weeks.

Many large corporations, including some that are publicly traded, signed up for the program, requesting millions of dollars. A Dallas-based hotel network run by a prominent Texas Republican donor got $58 million. He returned the money after public backlash.

Gulf Island Fabrication, a publicly traded Houston company that makes ships and other heavy equipment for offshore oil and gas drilling, got $10 million. Last month, House Democrats asked that it return the money.

Last month, the Treasury Department ruled that businesses with access to other sources of capital weren’t eligible for the forgivable loans and asked public companies to return the money.

The SBA has so far refused to release the full list of recipients. ProPublica is among a group of media outlets suing over the delay.

On April 24, Congress poured an additional $310 billion into the fund, but more than a month later, there is about $120 billion left.

After missing out during the first round, a pain-management therapist in Tyler was approved during the second round in April, but by then, he had let go of his two employees.

“Now the problem is I can’t afford to bring back my employees yet, and 75% has to be used for employees within eight weeks of the time you get the money,” the therapist, Kenneth Shepherd, said. Under the SBA’s requirements, employers have to use three-fourths of the money to pay employees.

“This has been a joke, and most are in the same boat: Many got the loan while they were closed. This wasn’t well thought out. … I wish I’d never applied for it.”

The challenges extend beyond applicants. The SBA’s Abell said his office has had to adjust daily to Congress’ changes to the program.

“They keep amending it, trying to open it up for smaller businesses, minorities that haven’t been able to be served because the bigger businesses were able to jump in on the program,” he said.

Congress passed a bill adding flexibility to the loan program, including giving business owners more time to spend the funds and lower the share they have to use for payroll. The bill has gone to President Donald Trump for his signature.

Stepping In

Trying to address some of the PPP deficiencies, cities and counties across Texas created their own versions of the PPP, by partnering with groups such as LiftFund to administer the public funds in the form of small grants and loans of up to $25,000 with 0% interest, with payments deferred for three months. In the case of Harris County, the money lent is reimbursed if the business remains open after five years.

The agencies must report back to the local governments, which have oversight over how the funds were allocated.

“We wanted to have locals feel comfortable, to have access to a human being, to give small-business owners who may not be sophisticated with some of these federal programs the ability to not feel intimidated to access credit,” said Peter Zanoni, city manager of Corpus Christi.

In every case, hundreds of businesses flooded the application process, requesting millions more than were available.

“It was really almost eye-opening when you saw 618 applications totaling more than $178 million in requests” for a $2 million program, said Jessica Herrera, El Paso’s director of economic development. “It gives you a snapshot for the need that was out there.”

Corado, the small-business owner from Harris County, has had no income since flights to her native Honduras stopped after its government closed its borders because of COVID-19.

From a small office in a strip mall in a largely immigrant and Hispanic part of Houston, clients drop off shoes, clothes, cellphones, important documents and other goods she personally delivers to their relatives in Honduras several times a week.

She applied for $10,000 from the county to cover the rent and her utilities after depleting her savings of $4,000.

Corado, as did many in the immigrant community, learned about the federal PPP through Spanish-language TV news stories. She wrote down the website and handed it over to her son to help her apply.

She speaks English, but not enough to fully understand the legal and banking documents. While the PPP’s first round opened April 3, sole proprietors like Corado weren’t allowed to apply until April 10, six days before the first round of funding ran out.

When a second round of money was made available, Wells Fargo sent her a standard email saying it was continuing to process applications, but by then, she had been approved for the county loan and her son suggested it was best to leave it alone.

If the county loan hadn’t been there, she said, she would have had to ask one of her sons for money or to borrow it from somewhere else.

Whether the local government’s efforts pay off remains to be seen. Not only is the amount of funds available limited, but because it was first-come, first-served, it meant that it also favored those who were quickest to get their applications ready.

Garcia, the Harris County commissioner, said this was because he knew speed was critical to make sure that businesses about to close would get some support. “I didn’t want perfection to be the enemy of the good. I knew we had to move fast.”

Since May 1, the county has approved 177 loans totaling nearly $4 million.

“There are lots of people out there who need the money,” said Robert Stein, a Rice University professor who has co-authored a book and several articles on federal assistance programs that included small-business loans and grants. “My question is, would this make an appreciable difference in the overall economy of Harris County? It will make an appreciable difference in some of these people’s lives.”

While in most places support for the programs was unanimous, in Harris County, the two Republican commissioners voted against it. One of them, Jack Cagle, declined an interview request through his spokesman.

Commissioner Steve Radack, the other Republican member, said it was an issue of fairness in how the program was rolled out and that it was forgivable.

“We should do what we can to aid those small businesses, but not on a first-come, first-served basis. There have to be other factors looked at such as credit, how a business was doing before this,” he said.

“But in the rush to give away the money, a whole lot of people didn’t get a shot in even submitting a loan application,” he added.

That includes Pedro Cordero, who runs Curazao, what he calls a multiservice business where a mostly immigrant clientele goes in to do everything from getting documents notarized to buying car insurance.

Cordero didn’t apply for either the PPP or the county’s program. He said he didn’t know enough about either and was told by his bookkeeper that he didn’t qualify because he didn’t use payroll. His four employees are contractors. The county’s loan didn’t have any payroll restrictions, and sole proprietors may qualify for the federal loan.

Meanwhile, he’s lost 80% of his business as people are afraid to leave their houses and to spend on anything that’s not essential. Families have stopped paying their car insurance and have delayed filing their taxes. Hardly anyone drops by anymore, he said from behind a plexiglass barrier he had installed because of the coronavirus.

When asked how he’s been affected, he pulled a small sheet of paper where he was jotting down his monthly expenses. Salaries: $12,000. Rent: $2,700. Electricity: $700. The list went on. He estimated he needed more than $16,000 a month to cover expenses.

If business doesn’t pick up, he is not sure how much longer he can go. “I don’t even want to say.” The business will continue, Cordero said in Spanish, but at best, it will be stagnant. He has been at that same spot since 1992.

Local governments are now setting aside some of the federal COVID-19 relief funds for small businesses in the form of grants. But now they are doing so with an eye toward equity to ensure some of those who need it the most have a shot at applying for it, acknowledging limitations from the initial programs.

In Travis County, officials are printing out applications and have a number where people can call directly for more information on the grants for those with limited access to the internet. In Bexar County, they are partnering with grassroots organizations that can do more on-the-ground marketing outreach.

For Corado, the Houston business owner, whether business returns is beyond her control.

Customers keep calling, asking when she will take packages again to Honduras, but all she can say is “not yet.”

Disclosure: The Texas Tribune, as a nonprofit local newsroom and a small business, applied for and received a loan through the Paycheck Protection Program in the amount of $1,116,626. ProPublica has not applied for or received a loan through the program.

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