When Frank Poindexter and his siblings were forced to shut down Wally’s Cafe Jazz Club back in March, he had no idea what the future would hold. All he knew was that the musical acts that perform at his family’s 74-year-old haunt in the South End normally brought in over a half-million dollars a year, and he still had bills to pay.
He quickly got government help to stay afloat, including assistance from the city of Boston, and a local nonprofit helped him create a reopening plan. He also received a $150,000 loan from the Small Business Administration. But when he applied for the SBA’s Paycheck Protection Program last spring, he balked because bankers weren’t giving him enough information about whether he’d need to repay the loan. He ultimately withdrew his application.
“We didn’t get any explanations to the question we were asking,” Poindexter said. “We were like, ‘We’re not going to deal with this.’ ”
As the SBA began accepting new PPP loan applications this week, it did so with new measures in place to ensure the fund distribution is more equitable and transparent. There were many complaints that the original PPP last spring left behind the smallest businesses and, in particular, entrepreneurs of color, after money ran out.
The current round is the third installment of PPP, which Congress funded with $284 billion out of the stimulus package passed in late December. This time, the SBA staggered the process, allowing community lenders and small banks, which tend to serve people of color, to offer loans first. All other banks will begin processing applications on Tuesday. The agency also simplified its application form and reduced the maximum size of employers eligible to apply from those with 500 employees to those with 300 employees.
The additional funding comes at a critical time for businesses owned by people of color, who often have less access to capital compared to their white counterparts. Nearly a year into the pandemic, 66 percent of Massachusetts entrepreneurs of color indicated they would need additional PPP money to survive the next six months, according to a recent poll by small business online network Alignable. That compares with 56 percent of the state’s entrepreneurs overall.
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“There’s finally as close to a level playing field as we’ve had since this program started in the spring,” said Steve Grossman, chief executive of Initiative for a Competitive Inner City, a nonprofit research and advisory group that coaches urban entrepreneurs.
ICIC has partnered with other local stakeholders to create the Massachusetts Equitable PPP Access Initiative, which has been working to make sure businesses that may have slipped through the cracks of the initial PPP rounds will get assistance going forward.
“There’s the danger that the way we administer relief is increasing the divide between those who are already well-served and those who are not well-served,” said Karen Kelleher, executive director of Local Initiatives Support Corporation, and a leader of the access group.
By allowing the smallest businesses to go first, the new SBA measures aim to prioritize funding for them. Smaller firms often need more time to prepare loan applications since they don’t have an army of lawyers and accountants who can help. Other new measures, like applicants needing to demonstrate a 25 percent quarterly revenue reduction year over year, were designed to home in on the businesses that need the support most.
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“There’s less concern around a big rush that folks were worried about in the first two rounds,” said Glynn Lloyd, executive director of the Foundation for Business Equity. “The money is going to be here for a little bit, so we don’t have to work seven days a week, 24/7.”
Banks have been gearing up for this round of PPP, and applicants seem better prepared, said Sushil Tuli, chief executive of Leader Bank.
The Arlington institution, which began accepting applications on Wednesday, has invested in technology and increased staffing by 20 percent to help with originating and underwriting loans. Already, the bank has received over 276 applications totaling $34 million. About 40 percent are from business owners who are seeking a second PPP loan, and about a third of the applications are for loans under $25,000, most of them from business owners of color.
“That’s more than what we expected,” said Tuli.
But a big barrier among business owners of color is wariness about taking on more debt, should they not meet the requirements for forgiveness. The SBA has sought to reassure applicants, reporting this week that it has approved nearly 85 percent of the total applications for PPP forgiveness, or about 1.1 million loans worth over $100 billion.
Still, Poindexter, the owner of Wally’s, remains unsure if he will apply for PPP again. The club has remained closed since March, and he’s hoping to apply for a shuttered venue operator grant from the SBA, which was another component of the stimulus bill.
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“I’m going to have to do more research,” he said. “For myself, the psychological ramifications of what I went through before still weigh on the decision on whether I want to be involved in it.”
Representative Ayanna Pressley has been pushing for grants — money that does not have to be paid back — because she knows that will help Black and brown businesses the most. The Boston congresswoman and Vice President-elect Kamala Harris introduced a bill in May to establish a $124.5 billion microbusiness fund giving grants of up to $250,000 each and setting aside 75 percent of that money for small businesses owned by people of color, women, and veterans.
“I’m encouraged that the latest round of PPP, passed and signed into law last month, includes many of the reforms I have championed,” Pressley said in a statement. “But let me be clear — while these changes are a step in the right direction, they do not go nearly far enough to provide our small businesses the support that they need. What is truly needed are direct, straightforward grants.”
President-elect Joe Biden’s proposed $1.9 trillion economic rescue package, unveiled Thursday, designated $15 billion “in equitably distributed grants” to help more than a million of the hardest-hit small businesses.
Grants have also been a central part of Governor Charlie Baker’s effort to help small businesses recover. Starting last fall, Massachusetts launched a series of grant programs totaling more than $700 million, funded primarily from federal COVID-19 relief money the state received. So far the state, through the quasi-public agency Massachusetts Growth Capital Corporation, has awarded three rounds of grants totaling $195 million to 4,119 businesses.
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The first round, awarded in late December, went almost exclusively to businesses owned by people of color and women. Subsequent rounds also benefited a significant number of people of color and women.
More than 10,000 small businesses have applied for the grants; one program provides up to $75,000 for businesses with 50 or fewer employees, while another offers up to $25,000 to businesses with five or fewer workers. The deadline for the current round has been extended to Monday at 11:59 p.m. and businesses can apply at empoweringsmallbusiness.org.
Many small businesses will need multiple sources of funding to stay alive, and they’re grateful for the growing number of options.
Vicki Gray, owner of New Chapter Home Improvement in Cambridge, received $30,000 in PPP funding last spring, which allowed her to bring four employees back on the payroll. She’s planning to apply for the current round. Gray also applied for the state grant program in November, but has yet to receive those funds.
One complicating factor: She needed to show a certificate of good standing from the secretary of state’s office, but it never arrived in the mail. So she went directly to the office to get a second copy. Many small business owners say such bureaucratic hurdles have slowed down the process.
Gray’s company had been providing painting and renovation services to private homes before the pandemic, but she’s since shifted her business to commercial clients and government contract work.
“I’m feeling pretty good and confident about PPP, and I’m hoping to get a little more, maybe $50,000 to $60,000, as we have grown,” said Gray. “This is a way to help us create jobs and keep citizens working.”
Janelle Nanos can be reached at janelle.nanos@globe.com. Follow her on Twitter @janellenanos. Shirley Leung is a Business columnist. She can be reached at shirley.leung@globe.com.