As the chairman of the board of the Statewide Hispanic Chamber of Commerce of New Jersey, Luis De La Hoz knows how desperately the Hispanic business community needs access to capital.
And, as a vice president of community development at BCB Bank, he knows how difficult it is for Hispanic businesses to get loans.
It’s why De Laz Hoz has little confidence that the additional $310 billion that was added to the federal Paycheck Protection Program on Thursday night will reach a large section of the Hispanic business community — the ones who own and operate the so-called mom-and-pop shops that dot Main Streets across the state.
De La Hoz also knows this: It’s nobody’s fault.
“Our community is not set up to take advantage of these programs,” he told ROI-NJ. “The money, no matter how much it is funded, will not reach us. The sad thing is: These are the small businesses that need it the most.”
The reasons for the disconnect, De La Hoz said, are multiple. Three, however, stand out:
- Inability to produce the proper documents: “If you’re a company that is using ADP or Paychex, you won’t have any trouble generating the report,” he said. “But, if you are using Jose, who is a friend of a friend in the community, and he has a hundred customers — and he has to make the calculation for you in Excel or somewhere else — it may take forever to generate the report. And it may not be what is required.”
- A lack of traditionally paid employees: “So many of our businesses do not have an official payroll because they are paid in tips or commissions,” he said. “If you’re in a restaurant or a beauty salon, everyone just gets a portion of what is made.”
- Fear of deportation: “Here’s the rumor that’s going around: Anyone who applies who is an undocumented worker or who has undocumented workers will get deported,” he said. “Our community does not want to interact with the government. It’s the same reason we are afraid to seek health care now, too. We think we are going to be deported.”
The solutions to these problems — and the causes — are not as easy to spell out.
So, who is getting the money?
There was plenty of fallout from the first round of awards from PPP and other programs in the $2 trillion CARES Act.
Shake Shack was shamed into returning $10 million. Harvard University was fighting to justify the $9 million it received despite having an endowment of more than $40 billion — before turning its check back in, too.
Some of the criticism for those awards went to banks — which must have played favorites, conventional wisdom said.
Mike Affuso, an executive vice president and director of governmental affairs for the New Jersey Bankers Association, pushed back on such an assertion.
“I know there’s some criticism over who got what and how,” he said. “I can’t speak to particular circumstances, but what I will say is that, if the object was to get money into workers’ hands, New Jersey got its fair share.”
Affuso said the process came down to applications — and the time it took to approve them.
“I think the picking and choosing was done by completeness of an application,” he said. “And, when you have a company that has 100 people, they may have a better accounting firm or business administration team. Companies that had a better business operation had a better chance of getting a positive outcome.”
Tom Comiskey, the regional president for M&T Bank, said his bank was able to get funding for 96% of the applications that were processed.
Comiskey said the bank could do that because it mobilized 2,000 employees on the task almost overnight. And, when it came to the applications, Comiskey said the size of the company — or the ethnicity of its owners — didn’t come into play. M&T’s stats back that up.
“Our average loan size was $234,000 and 63% of our loan applications were for less than $100,000,” he said. “It wasn’t up to the banks to interpret. We were a conduit to the (Small Business Administration). If the customer applied and they were deemed eligible, based on the SBA guidance, we put it through.”
M&T’s numbers were even better than the national averages, as 74% of loans nationally were less than $150,000.
Comiskey said banks didn’t pick winners. And most, he said, did not necessarily have to go away from their regular customers — that number already was more than the money allotted could handle. A second round of funding obviously would help M&T increase its reach, he said.
Adam Farrah is the president of the UCEDC, a community development financial institution — better known as a CDFI — located in Cranford.
CDFIs specialize in giving loans to the microbusinesses that often dot underserved communities and may otherwise not qualify to get a bank loan, he said. They are the type of loans that are supposed to reach the Main Street businesses that are at risk.
It’s a difficult task, he said.
“The first word that pops to mind is scale,” he said. “The demand and need is just so great.”
Farrah only has been in the position since January, but he’s been with the organization for more than three decades. And he said he has never seen anything like this.
He said the UCEDC offered its first zero-interest loan program March 20. The program had $500,000 to give out. It was oversubscribed in just a few hours.
Farrah will soon be getting additional money to lend. An additional $60 billion — specifically for credit unions and CDFIs — was added to the replenishment bill that was signed Thursday night.
He said he’s trying to make the application process easier for the Main Street businesses, hoping to avoid some of the issues that may have impacted PPP approval. But he can’t fix another issue: staffing.
The UCEDC has 16 employees, who already are scheduled to give double the 60-70 loans they did last year. There’s only so much his staff can handle. Applications — even complete ones — will undoubtedly miss the window.
Farrah said hiring new staff — at a time when you can’t even interview in person — isn’t practical.
“All the CDFIs are faced with that issue,” he said.
The state of New Jersey is trying to help.
The Economic Development Authority gave a grant to the Hispanic chamber so it could hire accountants to help businesses apply for PPP.
Last Friday, it agreed to provide between $20 million and $30 million in loans to UCEDC and five additional CDFIs in the state.
Tim Sullivan, the CEO of the EDA, said the state realizes the importance of these Main Street businesses — and acknowledges that getting them assistance can be challenging.
“Even in good times, minority-owned businesses — as well as businesses owned by women, immigrants, veterans and the LGBTQ community — always have been underserved by the private market,” he said. “That’s only exacerbated in a crisis like this.
“That’s why we are partnering with groups like the Hispanic chamber to help a broad array of firms get access to the surge federal resources.”
If the state can help make the connection, history has shown the money will be well spent.
The Hispanic business community is the fastest-growing in the state and in the country — one that generated $2.3 trillion in economic activity last year.
Carlos Medina is the CEO of the Hispanic chamber. He is also the president of his own company, Robinson Aerial, a survey company in Hackettstown.
He gets the hard truth, too.
Many members of the Hispanic business community on Main Street do not have bankers. They are part of what is known as the “unbanked” population, a segment believed to include more than 10 million in the country.
“Some of them have a checking account, but many do not interact with banks at all,” Medina said.
That hurt when it came time to apply for federal programs, Medina said. Many banks would not even take applications from people who were not customers. They didn’t need to, he said; they were oversubscribed with the people they already know.
“As a businessperson, I understand this,” Medina said. “If I already have your loan and some of your documents from a five-year relationship, I’m putting you at the front of the list. But that hurts the people who are the most vulnerable.”
Medina knows the smallest Hispanic businesses needs funding — and he knows that funding from the SBA, EDA and CDFI will not fill that need.
“These are good-hearted people who mean well,” Medina said. “They just don’t have the bandwidth to reach our community.”
De La Hoz agreed.
“Big banks and government will give the money to CDFIs because they feel like it is the right thing to do,” he said. “But the problem is that we need a lot of microloans for a lot of people in a lot of places — and the amount of money available for this will be little.”
There is hope. It came in the name of Jon Bon Jovi.
And Bruce Springsteen, Jon Stewart, Whoopi Goldberg, Danny DeVito, Kelly Ripa, Chelsea Handler, Saquon Barkley and many others.
Medina thinks the fund — which hopes to raise $100 million — could be a source of funding for the “unbanked” part of the Hispanic business community. He said he has put in a request for the maximum ask: $500,000.
“If they raise $100 million that would be 0.5% for a population that makes up 20% of the state,” he said. “I think that’s reasonable.”
Medina said he would use some of the money to increase staffing at the chamber and some to improve its capabilities. The heart of it —at least $350,000 — would go straight into the community.
“I’d like to do 3,500 grants of $1,000,” he said. “No loans, just a straight grant. That’s less than people got from the stimulus check — a check many of these people didn’t get.”
Medina said even that amount would have a huge impact on these Main Street businesses.
“They could use it for rent, payroll or lost revenue,” he said. “The things everyone else is getting money for.”