Final rules from the Small Business Administration leave some businesses ineligible for PPP loans

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Posted at 7:02 PM, May 14, 2020

DENVER -- A small business owner says bad banking and a change in rules from the Small Business Administration has made it impossible to get help during the pandemic.

Nanci Kerr owns a consulting firm called Sky to Ground that helps land developers get government approval. She said she is most proud of her work on affordable housing projects.

"I can remember the day exactly. It was March 17th and 80% of our work all got put on hold," Kerr said.

She attempted to apply for a $16,000 loan through the Paycheck Protection Program. She tried contacting Wells Fargo, her bank since 1989, but numerous attempts to apply online went nowhere. She spent hours trying to call them only to hear they wouldn't be able to help her.

"I wish I had a recording of this the guy who was like, 'Yeah, we prioritized some people over others,'" she said.

Wells Fargo is now facing lawsuits in three states — including Colorado — from small businesses who say the bank prioritized PPP loan applications for their biggest customers to generate the highest fees rather than processing them on a first-come, first-serve basis.

Kerr didn't give up and kept applying at other banks.

"I opened four new accounts with different banks to increase my odds of getting a loan," she said.

Finally, after weeks of applications, driving to branch locations and phone calls, she said Bank of Colorado agreed to give her a loan. Then, two weeks later, the bank told her she was no longer eligible, "per updated SBA (Small Business Administration) guidance" because she didn’t pay herself a regular salary. The bank even said she was being penalized for being a good business owner.

"Bank of Colorado said if I had gotten to the front of the line sooner before these new regulations (took effect), I would have gotten a loan," Kerr said.

The SBA Colorado District Office sent us the following statement about Kerr's experience:

“In addition to unemployment insurance, open to the gig economy under the CARES Act, self-employed individuals, independent contractors and sole proprietorships, with or without employees, were eligible to apply for EIDL Advance, EIDL long term loan and still may apply for PPP.

"PPP proceeds may be used for eligible payroll and fringe benefit costs for owner and employee wages, tips and other compensation, plus some overhead expenses such as utilities, mortgage interest, rent, interest payments on debt obligations and refinancing of EIDL loans. How the loan is calculated will depend on what type of business model is used by self-employed individuals.

"In efforts to be consistent with the intent of the CARES Act “to support the ongoing operations” of those in need, SBA issued interim final rules and guidelines to ensure funds are used to maintain existing operations and payroll and to also prevent any unintended windfall. This also helps to ensure that the finite appropriations are directed toward payroll protection, consistent with the Act’s central objective.

"If clients have questions about individual cases, we will strive to work with them to find the best outcome possible, as allowed under the law, rules and governing guidance.”

Kerr is likely not eligible for unemployment because she didn't pay herself a regular salary. Unemployment also doesn't cover business expenses.

"I have an office space that I lease, phone, internet, I have vendors that I have to pay for work they help me with," Kerr said.

She is frustrated that banks prioritized large companies for loans meant to help small businesses and feels the rules were changed in the middle of the game.

"I was asking for a $16,000 loan, this isn’t multi-millions of dollars. It would have really helped me for two to three months," she said.

Denver7 connected Kerr with the SBA Colorado District Office and is hoping for a positive update that can help other businesses in her situation.