Goldman Sachs CEO David Solomon last visited Baltimore in November to celebrate entrepreneurs graduating from the firm’s 10,000 Small Businesses initiative.
Nearly five months later Solomon announced Tuesday that Goldman Sachs is partnering with Baltimore and Lendistry to steer $10 million in capital from the federal Paycheck Protection Program to help keep some of those same ventures afloat through the COVID-19 pandemic.
“We’re committed to helping Lendistry, and other smaller lenders, reach as many small businesses as possible,” Solomon said. “Business owners … are in urgent need of capital.”
Baltimore Mayor Bernard C. “Jack” Young along with Sen. Chris Van Hollen and Lendistry CEO Everett Sands joined Solomon on the announcement call.
Lendistry was founded in 2014, according to the firm’s website, with the goal of using the latest fintech to provide loans to disadvantaged small businesses.
The firm intended to make “a big splash in Baltimore this year,” Sands said. As a result of the crisis the lender’s now focused on getting federal stimulus dollars to businesses in need, he said, and that includes ventures not currently in Lendistry’s portfolio.
“We need to make sure that we get through this crisis and that (small minority businesses are) still here,” Sands said.
Currently the lender is accepting loan applications for up to $250,000 from businesses in Maryland and five other states. In order to appl,y businesses must provide 12 months of payroll, a firs-quarter 2020 payroll summary as well as tax, health care and retirement statements for 2020 and 2019.
Congress created the $350 billion Paycheck Protection Program as part of the larger $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act passed in March.
Under the Paycheck Protection Program businesses are allowed to borrow up to 2.5 times their pre-coronavirus payroll to cover eight-weeks of payroll, and 20% for expenses like rent and utilities. Those loans are eligible for forgiveness if a business keeps its workforce at its pre-pandemic level.
According to the Small Business Administration, which oversees the program, 4,692 loans totaling about $1.5 billion have been made in the Baltimore District Market, which excludes Prince George’s and Montgomery counties. Howard Bank has made 516 loans to businesses totaling $139 million, numbers which put the bank No. 1 in total loans and No. 3 in total dollars.
Still, the PPP has hit some snags in its implementations.
One major challenge to the program’s rollout stems from the nation’s largest banks controlling most of the lending.
That’s resulted in complaints that those banks prioritized existing customers in obtaining loans from a limited pool of dollars. As a result, according to some critics, minority-owned small business that are more likely not to have a lending relationship with those institutions are shut out from receiving those dollars.
Local law firm Rifkin Weiner Livingston LLC filed a class action lawsuit on behalf of Profiles Inc., a Baltimore-based, woman-owned public relations firm, against Bank of America over restrictions the bank placed on providing paycheck program loans.
The lawsuit alleges those restrictions unfairly gave preference to existing customers in accessing public funds. A District Court judge Monday denied motions from the plaintiff for a temporary restraining order and preliminary injunction against the bank but recognized a “significant flaw” in the program’s implementation. The plaintiffs, according to their attorney, plan to appeal.
“The class action highlights serious shortcomings in Bank of America’s administering of the program, which, by application, denied scores of small businesses throughout the country the right to access these critical funds at a time when those funds are desperately needed,” Alan M. Rifkin, managing partner of Rifkin Weiner Livingston LLC, said in a statement.
During the call on Tuesday Van Hollen, who along with Sen. Marco Rubio is credited with crafting the larger COVID-19 stimulus package, acknowledged flaws in the paycheck program’s implementation.
As a result Van Hollen, along with Sen. Ben Cardin, requested the federal government direct more funds to Community Development Financial Institutions, like Lendistry, that provide loans to disadvantaged businesses.
“We’re continuing to try and address some of the bumps we’ve met along the way. This is a vital program and there’s things we can do to improve it,” Van Hollen said.
Access to that capital, DifferentRegard founder Dominick Davis said, is crucial to businesses like his.
Mount Vernon-based Different Regard normally manufactures and retails “affordable luxury clothing for everyone,” but saw revenues drop to zero as the COVID-19 outbreak swept through Maryland.
Davis and his team since switched to manufacturing face masks and medical gowns. Despite that lifeline the retail business remains closed and the businesses future remains uncertain.
“We just don’t know what the next 30 days hold,” said Davis, who graduated from the 10,000 Small Businesses initiative last fall.