Why are Pa. and N.J. receiving fewer PPP coronavirus loans? The New York Fed investigates.

Tamekah Bost, owner of the Philly cult-following food truck BetterBox, which makes artisanal egg rolls, applied for “every loan and grant I could think of,” she said.

She and her employees are still waiting.

“But I’m going to prove to everyone that we can make it without a loan, without any financial help. Because we started from nothing,” said the 25-year-old Philadelphia native. She applied for a $54,000 loan through the federal Paycheck Protection Program online and her application is still under review, according to the latest email she received from Bank of America.

BetterBox’s story is playing out elsewhere in Pennsylvania and other large metro areas in states hardest-hit by the coronavirus.

Some of the severely affected states — such as New York, New Jersey, Michigan, and Pennsylvania — are getting fewer PPP loans than some Mountain and Midwest states on a per-small-business basis, according to a new report.

In a May 6 research report issued by the New York Federal Reserve Bank, an analysis of the Paycheck Protection Program’s first early round of $350 billion found that some states are receiving more help financially than others.

And it’s the banking relationships that made the difference.

The researchers used the number of coronavirus cases as a proxy for the economic impact from COVID-19 in a specific state.

But the report found “no statistically significant relationship between the severity of the economic impact of COVID-19 — measured both in terms of cases and unemployment claims —and the share of small businesses getting PPP loans.”

In New York state, site of the nation’s largest coronavirus outbreak, less than 20% of small businesses were approved for PPP loans while in Pennsylvania, between 25% and 33% of small firms were approved. By contrast, over 55% of small businesses in Nebraska are getting PPP funding.

In the first round of PPP loans, documented reports showed that banks prioritized businesses with existing lending relationships to save money and avoid fraudulent applications.

In the second round of PPP loans, which the SBA started approving on April 27, the SBA has distributed $175 billion in loans to more than 2.2 million small businesses. The agency’s regional administrator, Steve Bulger, told The Inquirer on Thursday that there’s $100 billion more left.

Food services and restaurants need the loan money most — and the New York Fed found that they’re receiving it: “The more affected industries, such as retail trade and accommodation and food services, are receiving more PPP funding than industries that likely lost less revenues, such as information, finance and insurance, and educational services.”

There are, however, exceptions. One sector that received disproportionately more PPP funding is construction, classified as “essential business” in many states, making it “more immune to the social-distancing measures enacted to contain COVID-19,” the New York Fed wrote.

Nearly half (47%) of small businesses report that (PPP) funding is critical in keeping their business open, according to a new U.S. Chamber of Commerce/MetLife joint survey.

Bost is among the 23% of business owners who have either applied and not received funding or have unsuccessfully tried to apply.

"Small business owners are the foundation of our communities and they employ nearly half the American workforce. So many are struggling right now to keep their workers employed,” said Tom Sullivan, vice president of small business policy at the U.S. Chamber of Commerce. “With the latest round of PPP funds nearly exhausted, it is essential that we identify ways to step up for Main Street and find a solution for additional funding measures.”

Applying through small community banks and other non-bank lenders appears to be the better route.

States with larger shares of community banks such as North Dakota, Nebraska, Wyoming, and Iowa, as measured by the percentage of deposits in those banks, had a larger share of PPP loans. The percentage of deposits in community banks in those four states ranged between 35% and 50%.

By contrast, that percentage of deposits in community banks was under 10% for New York, New Jersey, Michigan, and Pennsylvania, among many other states.

Shasnettay Warner, owner of Tiny Tech Learning Lab day-care center in West Oak Lane, applied for a PPP loan “as soon as it was available. I stalked the website until Pennsylvania was added and reached out to the governor’s office. But I never heard anything back. The SBA, of course, had a high volume. I was stuck. I wasn’t sure what would happen.”

She then called the Women’s Opportunities Resource Center (WORC) and applied through the nonprofit for the PPP.

“I had a relationship with them in the past — I had gotten a line of credit with them — so this was a blessing. If it hadn’t been for WORC, I’d have been out of luck.”

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She’s expecting $47,500.

“I have about 13 employees who are still on staff. There were a couple who found jobs in the interim. It’s a very small business. We have a max of about 15 staff members, not including myself. I don’t take a paycheck on the business. I still work a 9-to-5 job at GlaxoSmith Kline where I’m an associate scientist in R&D in King of Prussia,” she said.

Bost of the Better Box is still working hard at 8601 Frankford Ave. for take-out orders. Her signature salmon egg rolls and cheesesteak egg rolls sell out in a few hours. Currently she has four full-time employees and five part-time, and wants to hire for a second take-out location which she expects to open May 23.

And without a PPP loan.

“As a small business, we did not receive any funding, federal or city grants or even loans to offer assistance during these troubling times, she said. “What we did receive was an overwhelming show of support from our amazing customers and that in itself has been our saving grace.”