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Fewer PPP Loans For Small Businesses In South San Diego County

Andrew Benavides, owner of Cafeina in City Heights, taking a customer's order on July 27, 2020.
Amita Sharma
Andrew Benavides, owner of Cafeina in City Heights, taking a customer's order on July 27, 2020.
While more coronavirus relief for small businesses is likely in store as Congress works on another round of loans under the Paycheck Protection Program, some storefronts in underserved communities south of I-8 couldn’t get any money during the last round.

Just one month into the pandemic, and one year into fulfilling his long-standing dream of owning a business, Andrew Benavides’s City Heights coffee shop’s sales dropped by half.

“People decided not to go out anymore,” he said. “And it was frustrating, discouraging for sure.”

Benavides, 26, hoped to use a Paycheck Protection Program (PPP) loan as a lifeline to cover everything that keeps his business called Cafeina afloat — rent, utilities, inventory. But then came more bad news. Officials told him he wasn’t eligible for the federal relief loan.


“According to them at the time, I didn't fall under one of their qualifications, which was having employees,” Benavides said.

Tiny businesses are bleeding in San Diego County as the pandemic rages on. The PPP loans are a big part of the federal government’s effort to lessen the economic fallout from COVID-19. The money is intended for businesses hit hard by the pandemic lockdown.

Video: Fewer PPP Loans For Small Businesses In South San Diego County

But that financial help may not be getting to its targets because the government’s definition of small businesses for the loans was those with fewer than 500 workers.

“To most people, that's a very large business,” said Enrique Gandarilla, executive director of the City Heights Business Association. “And if they really wanted to help Main Street America, they should have lowered that threshold so that these smaller businesses wouldn't have to compete with businesses that have 500 employees.”

Gandarilla said mom and pop stores and solo shops, such as Benavides’s Cafeina, even had to compete in the application process itself.


“I think large businesses in more affluent areas that have healthy bank accounts and can work with lawyers and accountants and financial advisers had a much easier time,” Gandarilla said. “Whereas a small business person is the CEO, the human resources department, the finance department, the IT department. They do everything so they can't just delegate this stuff to other staff to process. They have to do it themselves.”

And there were other obstacles.

“The rules kept changing,” Gandarilla said. “It's just not a good situation for small businesses.”

Especially in some poorer communities of color such as City Heights, which received a total of 317 loans. That money, according to federal data, helped save around 1,500 jobs.

In contrast, Clairemont, north of I-8 and where more than half the population is white, received 800 loans and retained over 3,600 jobs. Clairemont’s population is actually just under a quarter smaller than City Heights. La Jolla businesses took in 1,550 loans and saved 17,500 jobs.

Gandarilla blamed that wide gap on poor loan outreach in areas that are low-income, of color and ethnically mixed.

“In City Heights, we have a community that is extremely diverse with many first-generation immigrants that are entrepreneurs, very entrepreneurial,” he said. “But they come from countries where they don't trust the government for very good reasons and they're not used to dealing with government agencies.”

There are also big margins in the number of PPP loans given out to some cities, north and south of the 8 Freeway. Chula Vista received 2,200 PPP loans and saved over 21,000 jobs. Carlsbad businesses obtained 3,400 loans, preserving more than 38,000 jobs. Escondido appears to be an outlier. The ethnically diverse North County city secured 2,100 loans and held on to 32,000 jobs. It’s one of the cities that was more efficient in a key goal of the program — job preservation.

“Cities like Escondido, El Cajon, La Mesa, their small businesses saved over 6 1/2 jobs per loan, whereas in Encinitas, for example, it was only 4.4 jobs per loan,” said San Diego State University business lecturer Miro Copic.

Copic said overall, the distribution of loans was aligned with the distribution of businesses in the county.

“A lot of business, a lot of new office buildings, a lot of manufacturing actually is in north San Diego County,” Copic said. “They are in these Vista and San Marcos corridors. And a large part of the population is north of the 8.”

He said ultimately, the PPP served its mission in getting small loans out to small businesses.

“The number of loans less than $150 thousand were 85 percent of the PPP loans processed in San Diego County,” Copic said.

But he also agreed officials have fallen short in serving all businesses who needed the money.

“From a federal, state and local perspective, there could be a lot more done in areas that are underserved, that have hundreds of people of color that need to have access to keep businesses open, without a doubt,” Copic said. “The government has done an average to below-average job of communicating the relative simplicity of applying for the loans. Compared to applying for a loan at a bank, this is super simple.”

More coronavirus relief is likely in store, though, as Congress works on another stimulus package.

There are also grass-roots efforts to help local businesses hit hard by the pandemic, according to Gandarilla.

“We decided that we needed to create our own fund for our businesses in City Heights because we didn't see that many of them could successfully compete for these available funds, whether it's at the city level, state level or the federal level,” Gandarilla said. “And fortunately we were able to raise $230 thousand to support many of the businesses that didn’t receive any money.”

As for Benavides, he says he’ll apply for the next round of PPP loans.

“We don't need too much, but we still need a lump sum just to keep our lights on,” he said.

Fewer PPP Loans For Small Businesses In South San Diego County
Listen to this story by Amita Sharma.