Sliver of companies got half of pandemic aid

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A lot of businesses received forgivable loans from the federal government to help them through the pandemic. To be exact, 18,768 in the eight counties of Western New York.

The loans were worth $2.2 billion, altogether. But a fraction of the companies — some 5 percent — received about half that sum. 

Two businesses got the maximum $10 million loan allowed under the Paycheck Protection Program: Ferguson Electric and the Buffalo Medical Group.

New Era Cap, widely criticized by public officials earlier this year for taking PPP money then laying off 117 employees, received the third-largest loan, $8.4 million. Other big borrowers include familiar local brands: Perry’s Ice Cream, Dunn Tire and NOCO, among them. 

A pair of the region’s biggest law firms — Hodgson Russ and Phillips Lytle — rank as the 10th and 11th largest loan recipients. Between them, they obtained $13.2 million.

Out of all for-profit industries, full-service restaurants received the most money, $87.6 million. Behind them were doctors, $83.9 million. Next were car dealers, lawyers and construction contractors. 

E.J. McMahon, a senior fellow at the Empire Center for Public Policy, called the industry rankings “predictable.” Professional specialities and services, like doctors and lawyers, are high-wage, high-volume businesses, he said.

“They tend to be fairly labor-intensive. They see a lot of people, they employ a lot of people and they pay well,” McMahon said.

Largest loan recipients by industry

Source: Small Business Administration.

Nationally, the Paycheck Protection Program disbursed loans worth $523 billion. Funds went primarily to companies and nonprofits with up to 500 employees. Sixty percent of the loan was earmarked to cover 2.5 months of payroll, but the rest could go to other operating expenses, including rent. The loans are forgivable, if spent according to the rules. 

Fred Floss, a professor and economist at Buffalo State College, said the program design, which relied on banks to process loan requests, favored larger companies. 

“If you were a bigger company — if you were a law firm or an accounting firm that was used to putting in proposals to banks — you were going to end up being at the front of the line,” he said.

Larger companies, with presumably more resources to pursue loans, were among the biggest recipients. That’s to be expected, given that the cost of payroll was a major factor in determining loan size.

Three hundred forty-three companies borrowed $1 million or more, for a total of $707.2 million. Thus, 2 percent of the companies that received loans obtained 33 percent of the funding. They employed, on average, 181 people each, compared with an average of 14 people each for smaller businesses that obtained loans.

“In the final analysis we are going to find there are great inequities and some businesses had great advantages over others,” U.S. Rep. Brian Higgins told Investigative Post. “That was the imperfect nature of it.” 

How bigger companies used their loans

Investigative Post contacted the two largest loan recipients, Ferguson Electric and the Buffalo Medical Group. Jim Schneider, president of Ferguson Electric, hung up on a reporter before he could pose any questions. 

Christi Berardi, a spokesperson for the Buffalo Medical Group, said loan money made up for revenue lost due to a reduction in surgeries performed during the pandemic shutdown. Officers took pay cuts while many employees were furloughed.

Jim Heaney & Susan Arbetter discuss the story on Spectrum News

“The PPP loan funds have allowed us to phase the employees back into the group and maintained their benefits while they were furloughed,” she said.

The Akron-based Perry’s Ice Cream, with a staff of about 410, borrowed $5.2 million. Spokeswoman Marissa Wilson said all of it went to personnel costs.

Largest corporate loan recipients

Source: Small Business Administration.

The eight car dealerships included in the records with the “West Herr” name obtained loans ranging from $597,472 to $5.1 million. They total $14.6 million. 

West Herr wasn’t the only brand that had multiple loans associated with its name. There were other auto dealers, like the Basil family, technology firms like Calspan, and developers like Uniland, among others.

Richard Braden, a West Herr attorney, said the company furloughed 1,150 of its 2,100 employees in March due to sharp declines in vehicle sales. The PPP loans were used “exclusively” for payroll, he said, adding that employees were brought back in May. 

“West Herr is a privately owned company that does not provide information regarding its finances or local owners,” he said. “Nevertheless, we can tell you that several West Herr dealerships properly applied.”

 Restaurants among smaller borrowers

PPP loans were especially important to truly small businesses, said Sue McCartney, director of the Small Business Development Center located at Buffalo State College. 

McCartney said the center’s clients, about 1,000 annually, typically employ 50 or less. The busy season typically settles down in the first quarter, McCartney said. Not this year —  even by July, people continued to flood the office searching for aid. 

“They were desperate for these funds — desperate,” she said.

McCartney said restaurants, in particular, were in need of assistance.

Phil Gambini discusses his coverage on WBEN

Ilio DiPaolo’s, the Blasdell restaurant and banquet operation, received $336,442. Owner Dennis DiPaolo said the loan gave him “immediate hope” earlier this year and was a “huge” assistance in meeting payroll for his 80 employees. But the anxiety lingers. 

“It is really, really a precarious situation,” he said. “You blink your eyes and things are changing.”

Smaller businesses shared many of the same needs and concerns of their larger counterparts. 

Jacqueline Stover-Stitts, owner of Golden Cup Coffee Roastery on Jefferson Avenue, sells bulk orders to large businesses and operates a cafe. The company needed to meet payroll and pay rent. The $9,400 loan wasn’t enough, she said, but nonetheless a big help.

“I wouldn’t be here without it, let me just say that,” she said.

La Verdad Cafe in Lovejoy borrowed $10,000. The loan stabilized finances as the operation switched primarily to takeout during the shutdown, owner Vivian Robinson said. Business has boomed since. She added two employees this year. 

“I’ve done 60 percent better during the pandemic,” she said.

Loans that raise questions

Businesses and nonprofits that laid off people after getting help through the program drew ire across the country. Locally, New Era took the brunt of the public outcry, but others took similar steps.

Investigative Post identified 20 companies in Western New York that received a PPP loan then laid off 1,433 employees. Their loans were collectively worth $40.2 million.

Among them: AllPro Parking, which operates 31 parking lots in the region. It received $2.2 million then laid off 92 employees. AllPro’s parent company, Ciminelli Real Estate, received a loan worth $1.8 million for other business activities. 

Loan recipients who laid off employees

Source: New York State Department of Labor. 

Several companies under investigation obtained loans.

The Western Regional Off Track Betting Corp., a publicly owned creation of the state Legislature, received a $3.2 million loan while subject to federal and state probes. OTB subsequently laid off about 300 employees.

Nearly 100 debt collection agencies received $17.4 million. Two of them — Check Security Associates and ROC Asset Solutions — were among those being sued by the state Attorney General for deceptive practices.

Coming up

• Tuesday: Overview of $2.4 billion program.
• Wednesday: Companies receiving the most aid.
• Thursday: Notable nonprofits that received funding.
• Friday: The have-nots, and how to improve on a successor program. 

Phil Gambini