Like many Seattle-area small businesses trying to ride out the coronavirus pandemic, Justin Cline is having serious doubts about the federal government’s $349 billion small-business bailout.

Cline, co-founder of Full Tilt Ice Cream, is eager to tap a loan program through the Small Business Administration (SBA) to rehire the roughly two dozen laid-off staff at his five retail outlets as soon as public health officials give the all-clear. “This could give us a chance” to get through the crisis, Cline told his business partner and wife, Ann Magyar, when the program was announced last month.

But though he has applied for SBA loans, he doesn’t know whether his loan application has been approved or when any funds might show up. He’s been told the same by other local business owners. “Nobody has heard anything,” he says.

Charlie Anthe, co-owner of the Ballard restaurant Moshi Moshi Sushi & Izakaya, isn’t having much more luck. Though his loan was approved late Monday night, he doesn’t have a funding date yet — and he fully understands other business owners’ frustrations with the process. “The best analogy I can give is imagine trying to file your taxes and you are handed a 1040 Form and nothing else — no instructions, no guidance, no examples —  and no assurance that if you do it wrong you won’t be punished later,” says Anthe, who bought Moshi Moshi with his wife, Rumi Ohnui, last year.

Cline and Anthe’s experiences would probably be familiar to many of the roughly 160,000 small-business owners in the Seattle metro area and nearly 600,000 statewide, who may have been hoping for a lifeline from the SBA.

Under Congress’s newly enacted Coronavirus Aid, Relief, and Economic Security Act (CARES), the SBA has been granted extraordinary resources to help save an economy deeply injured by the coronavirus. But so far, that rescue has been marred by a  host of internal problems and a rocky roll-out.

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On Monday, the SBA’s online portal crashed, reportedly erasing millions of applications by small businesses seeking $10,000 emergency grants that the government promised would be available in less than a week.


Other local small-business owners say they’ve been turned away for a larger SBA loan by private lenders that only want to work with established customers, or they’ve been allowed to apply, but then are left in a limbo of automatic replies and long waits on hold for customer service.

Those frustrations have been magnified by fears that the $349 billion in the program may be exhausted before all businesses have been helped. Indeed, the SBA itself encourages businesses “to apply as quickly as you can because there is a funding cap.”

Although some banking and economic experts think these early stage problems will be resolved, they’re already undermining much of the reassurance that the small-business initiative was meant to project.

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On paper, the CARES Act offers small businesses — those with 500 or fewer employees — a lifeline to limp along during the pandemic, and the government-ordered closures, until their local economies can be slowly brought back to full power.

That lifeline starts with a $10,000 emergency grant, available directly through the SBA, for any small business facing an immediate cash crunch. That’s ideal for someone like Omar Osman, who applied for the grant after losing most of the business at his restaurant, Xalwo Kismaayo, in Tukwila. With several thousand dollars in past-due rent and utilities, the grant “could buy me maybe two or three weeks” of time, says Osman, a father of three.


But the SBA’s real firepower lies in the so-called Payroll Protection Program (PPP), which lets businesses borrow the equivalent of two and a half times their pre-crisis payroll, up to $10 million. Borrowed funds can be used to keep workers on payroll or to rehire laid-off workers, as well as for certain other expenses such as rent.

These loans require no personal guarantee, carry only a 1% interest rate and, best of all, can be wholly or partly forgiven if the business meets certain conditions, including having most of its pre-crisis staff within eight weeks of receiving the loan.

Businesses can also tap a low-interest Economic Injury Disaster Loan (EIDL)  of up to $2 million and apply for relief from payments on any existing SBA loans.

Taken together with the federal government’s unemployment benefits, the SBA programs are meant not only to minimize layoffs but also to keep companies able to quickly reopen once governments begin allowing normal economic activity. By having “enough cash getting to workers and enough cash getting to businesses,” the federal government is trying to lay the groundwork for a quick post-pandemic recovery by keeping companies “on life support,” said Brett Theodos, an expert in economic and community development at the Urban Institute.

At Moshi Moshi, for example, Anthe hopes to use part of the PPP funds to rehire staff. Even though the restaurant may not be open yet, Anthe said, the funds will let him reassemble the crew while giving them “a lot more stability” than if they were simply to rely on unemployment insurance.

Elizabeth Reed, co-owner of Interface Technologies Northwest, a Lynnwood-based installer of Wi-Fi and other commercial telecommunications systems — and an essential business under the governor’s plan — said their PPP loan, which was also approved this week, will cover payroll and health insurance premiums for the company’s 23 employees until the shutdown is lifted.


But, again, the uncertainties around the program make all those plans theoretical. Said Anthe: “I’m again in a waiting period of unknown duration and so I cannot hire back my staff yet.”

Such frustrations don’t surprise banking and economic aid experts, given the scale and speed of the federal small-business bailout.

Under CARES, the SBA is trying to move vastly more money than it normally does. What’s more, to get that money to small businesses, the SBA has essentially drafted private lenders to not only make the loans, but to do so quickly, with minimum documentation.

In many cases, borrowers say they’re being asked for little documentation, such as proof of a year’s worth of payroll, which leaves some banks fearful they’ll be blamed if business owners fudge their applications. “The biggest fear the banks have is liability,” said Lewis Horowitz, a tax attorney with Seattle-based Lane Powell who is advising businesses on the loan program.

Horowitz, Theodos and other experts expect these problems will be ironed out, just as they were after the chaotic first phase of the government bailouts during the Great Recession. In fact, despite the early problems, the government reported that as of Tuesday, banks had already processed $70 billion in loans for 250,000 small businesses since the program opened Friday.

Tuesday also saw a request by Treasury Secretary Steven Mnuchin to Congress for an additional $250 billion for the small-business coronavirus program, raising the total to $599 billion.


The longer-term challenge, experts say, is whether companies that do receive funds will actually be able to restart once the pandemic is deemed over.

And that, experts say, will depend not only on the kind of business or the managerial skills of the owners, but also of the economic conditions that exist when governments let business reopen.

Reed, for example, said Interface Technologies Northwest plans to use an Economic Injury Disaster Loan both to buy supplies needed to restart the business, but also as a buffer until business gradually returns to a pre-crisis level.

“It doesn’t work that way — that we’ll open and everything will come back the way it was,” she said. To the contrary, because her clients are themselves businesses, “I’m expecting some of our customers will not return,” she said. “We’ll need that cushion.”

Many companies lining up for SBA aid are also trying to keep expectations low.

That’s the case at National Event Pros, a SeaTac-based event management company that went into the pandemic with around 40 employees. Owner Lance Salisbury plans to use his PPP loan to gradually ramp up business capacity as corporate clients begin throwing company picnics and other events and as Salisbury looks for new customers to replace any that don’t return.

The loan provides a longer “runway” to look for business and recover the business, says Salisbury. “And I think that’s the key … to bring employees back.”


This article has been updated to clarify that Charlie Anthe co-owns Moshi Moshi with his wife Rumi Ohnui.

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