Small-business owner describes frustrating PPP experience with longtime banker JPMorgan Chase

The CARES Act, the first round of fiscal stimulus to help those impacted by the coronavirus pandemic, was frustrating for many small businesses that were left out in the cold. It was intended to help businesses with fewer than 500 employees, though some publicly traded companies were granted millions of dollars in loans, including the owner of Ruth’s Chris Steakhouse and Shake Shack, which later said it would return the money. 

A new relief deal, with about $300 billion more for the Paycheck Protection Program, passed the Senate on Tuesday and will get to President Trump’s desk this week. The program, which disbursed $349 billion already, offers forgivable loans managed by the Treasury Department and the Small Business Administration.

Gianfranco Sorrentino, owner of three Italian restaurants in New York City (Il Gattopardo, Leopard at des Artistes, and Mozzarella & Vino), is among the small-business owners who were unable to get any funds from the first round of PPP. 

When businesses shut in March to prevent the spread of coronavirus, many restaurants in New York and across the U.S. turned their dine-in operations into food delivery services –  but that wasn’t a viable option for Sorrentino. He was forced to shut down his restaurants. The mounting monthly payroll expenses, rent, insurance, utility bills, healthcare costs and real estate taxes Sorrentino faced were insurmountable once people stopped walking through his doors. Monthly payroll costs for his three restaurants totaled $577,000. 

Mozzarella & Vino restaurant

Sorrentino had to let go of all his workers: 160 full-time employees and another 20 part-time workers. Even though his three restaurants are shuttered, they’re still costing him $150,000 in health insurance, real estate taxes, utilities, and insurance liabilities. Rent expenses are another challenge Sorrentino is trying to work out with his landlord.

‘The site crashed all the time’

The Paycheck Protection Program launched April 3, with $349 billion available to small businesses on a first come, first served basis. Sorrentino wanted to apply that day, but he was forced to wait three days because his lender wasn’t ready.

Sorrentino says that JPMorgan Chase, his lender of 30 years, told him applications would not be processed online until April 6 because it was having some difficulties in rolling out the program to their clients.

Sorrentino says he tried numerous times to get his application processed on April 6, but the system kept crashing. 

“On Monday we started to send the application but the site crashed all the time,” he said. Finally, on Wednesday he was able to submit his application. 

The maximum loan amount for each business was $10 million or 2.5 times their monthly payroll. 

Based on his expenses, Sorrentino expected to get up to $1,442,500 – 2.5 times the monthly payroll at his three restaurants. 

JPMorgan Chase provided publicly traded companies with PPP loans while putting Sorrentino’s application on ice. (According to a Morgan Stanley note, JPMorgan provided 31% of the loan amount publicly traded firms said they got through PPP.) 

The day the PPP program ran out of money, Chase sent Gianfranco no notification. Several of his emails went unanswered. 

“I felt very disappointed because after 30 years you deal with a bank, you know, personally and business-wise, [I] felt that they could [have been] more active, proactive and let me know what was going on,” he said.

Two days after the funds had run out, Sorrentino says he finally got a phone call from a Chase representative informing him that his loan application for the Leopard was approved by Chase and had been sent over to the SBA. He was told that the applications for his two other restaurants Il Gattopardo and Mozzarella & Vino were still on hold because Chase hadn’t had enough time to review them yet. 

(AP Photo/Mark Lennihan)

Finally, Chase called him this week to inform him that all three of his loan applications had been processed and sent to the SBA. Chase granted loans to virtually all of its commercial banking customers, while processing about 18,000 loans out of more than 300,000 applications it received through its Business Banking unit for smaller business customers. While denying that it prioritized larger commercial banking clients, Chase said its commercial banking clients had their loans processed faster because that unit got fewer applications.

Sorrentino says he hopes that once the new round of PPP funding becomes available, it’s “not going to dry up before they get to my application.” 

Paycheck Protection Program flaws

Receiving the funds however wouldn’t put Sorrentino’s mind at ease. It would only let him start thinking about how his restaurants can survive once the economy reopens.

“I am worried [that when I eventually open] the business is gonna be very slow. [If] I use all of the [PPP] money in these two months what am I going to do in two months? In three months? Because for sure before September we’re not going to see any business, at least in New York,” he said.

The Independent Restaurant Coalition denounced the new round of fiscal stimulus approved by the Senate for failing to meet the needs of the nation’s independent restaurants. The IRC points out that 60% of total unemployment claims in March came from the food and beverage industry, yet less than 9% of PPP loans went to independent restaurants.

Independent restaurants that did get funding are still deep in the red, according to the IRC. “For the small groups that did receive funding, they won’t be able to keep their employees working after that cash runs out. Restaurants are cash-flow businesses, and until they can generate revenue they’ll still have a hard time maintaining a payroll whenever they reopen,” the IRC said. 

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