'How Wall Street Is Hampering Some Small Businesses Seeking Aid' diff viewer (4/5)

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How Wall Street Is Hampering Some Small Businesses Seeking Aid	How Wall Street Is Hampering Some Small Businesses Seeking Aid
2020-06-09 21:18:31 UTC	2020-06-13 03:06:31 UTC (3 days later)
When Michael Sullivan borrowed $22 million from a specialist Wall Street lender in 2018 to buy and renovate two Florida hotels, he had no idea how costly that decision would prove to be.	When Michael Sullivan borrowed $22 million from a specialist Wall Street lender in 2018 to buy and renovate two Florida hotels, he had no idea how costly that decision would prove to be.
He found out recently, once visitors stopped coming to his properties because of the pandemic, prompting him to seek help from the federal government’s new small business loan program. But first, he had to tussle with his lender, the credit fund Benefit Street Partners, just to win permission to get the government loan. The legal fight cost him thousands of dollars and a month in lost time.	He found out recently, once visitors stopped coming to his properties because of the pandemic, prompting him to seek help from the federal government’s new small business loan program. But first, he had to tussle with his lender, the credit fund Benefit Street Partners, just to win permission to get the government loan. The legal fight cost him thousands of dollars and a month in lost time.
Mr. Sullivan said he had no other option because the terms of his contract with Benefit Street contained severe restrictions on future borrowing, and the lender was unwilling to budge.	Mr. Sullivan said he had no other option because the terms of his contract with Benefit Street contained severe restrictions on future borrowing, and the lender was unwilling to budge.
“Their mind-set was, this is your problem, not ours,” Mr. Sullivan said.	“Their mind-set was, this is your problem, not ours,” Mr. Sullivan said.
Most small business owners dip into their savings or borrow from traditional banks. But many, like Mr. Sullivan and others in the hotel or restaurant business, borrow from private lenders such as hedge funds, credit funds, or investors in securities backed by pools of commercial mortgages. The contracts governing such loans can be complicated and are designed to ensure that lenders are paid back every penny they’re owed. To that end, they often prevent the borrower from taking on new debt without getting permission from them first, and they frequently seek the right to control the terms of any new loans, as well as what the newly acquired money is used for.	Most small business owners dip into their savings or borrow from traditional banks. But many, like Mr. Sullivan and others in the hotel or restaurant business, borrow from private lenders such as hedge funds, credit funds, or investors in securities backed by pools of commercial mortgages. The contracts governing such loans can be complicated and are designed to ensure that lenders are paid back every penny they’re owed. To that end, they often prevent the borrower from taking on new debt without getting permission from them first, and they frequently seek the right to control the terms of any new loans, as well as what the newly acquired money is used for.
The CARES Act, which created the government’s Paycheck Protection Program that Mr. Sullivan borrowed from, prohibits any loan money from being controlled by other lenders. At the same time, it does not outlaw lenders like Benefit Street from enforcing existing contracts with borrowers seeking government funds.	The CARES Act, which created the government’s Paycheck Protection Program that Mr. Sullivan borrowed from, prohibits any loan money from being controlled by other lenders. At the same time, it does not outlaw lenders like Benefit Street from enforcing existing contracts with borrowers seeking government funds.
The $650 billion paycheck program has helped millions of small businesses, but its rollout was uneven and slowed by confusing rules. The program’s structure itself created other challenges. For example, the aid came in the form of loans that could be forgiven under certain circumstances, but some businesses hesitated to spend the money because they were unsure about how exactly the forgiveness would work. And for businesses such as Mr. Sullivan’s, the program’s structure has required them to fight costly legal battles simply to get any funds at all.	The $650 billion paycheck program has helped millions of small businesses, but its rollout was uneven and slowed by confusing rules. The program’s structure itself created other challenges. For example, the aid came in the form of loans that could be forgiven under certain circumstances, but some businesses hesitated to spend the money because they were unsure about how exactly the forgiveness would work. And for businesses such as Mr. Sullivan’s, the program’s structure has required them to fight costly legal battles simply to get any funds at all.
In April, Mr. Sullivan was close to getting a government loan through First Florida Integrity Bank. But the bank paused because he was wrangling with Benefit Street . The fund’s lawyers wanted him to agree that if he failed to satisfy any of the conditions of the government’s loan terms, Benefit Street could try to recoup its money by going after Mr. Sullivan’s personal assets. He found the condition too onerous, and refused.	In April, Mr. Sullivan was close to getting a government loan through First Florida Integrity Bank. But the bank paused because he was wrangling with Benefit Street . The fund’s lawyers wanted him to agree that if he failed to satisfy any of the conditions of the government’s loan terms, Benefit Street could try to recoup its money by going after Mr. Sullivan’s personal assets. He found the condition too onerous, and refused.
Instead, Mr. Sullivan offered to put the aid money — he was seeking $217,000 to pay employees and other expenses — into an escrow account under Benefit Street’s control while its lawyers worked on a deal with him and his two business partners. But his bank wouldn’t agree to that solution, citing the CARES Act restrictions around having the loan controlled by another lender.	Instead, Mr. Sullivan offered to put the aid money — he was seeking $217,000 to pay employees and other expenses — into an escrow account under Benefit Street’s control while its lawyers worked on a deal with him and his two business partners. But his bank wouldn’t agree to that solution, citing the CARES Act restrictions around having the loan controlled by another lender.
Mr. Sullivan eventually found another bank to process his application. This time, to satisfy Benefit Street, Mr. Sullivan had to deposit $200,000 into an “interest reserve” fund, guaranteeing that the lender would be paid on time. By then, he had spent roughly $10,000 on legal fees, including for Benefit Street’s lawyers, and lost about a month to negotiations, during which he laid off some of his hotel workers. He had also fallen sick with Covid-19.	Mr. Sullivan eventually found another bank to process his application. This time, to satisfy Benefit Street, Mr. Sullivan had to deposit $200,000 into an “interest reserve” fund, guaranteeing that the lender would be paid on time. By then, he had spent roughly $10,000 on legal fees, including for Benefit Street’s lawyers, and lost about a month to negotiations, during which he laid off some of his hotel workers. He had also fallen sick with Covid-19.
“You had to jump through those hoops because it was a loan,” Mr. Sullivan said. “It delayed everyone getting those funds.”	“You had to jump through those hoops because it was a loan,” Mr. Sullivan said. “It delayed everyone getting those funds.”
Pholida Barclay, a spokeswoman for Benefit Street, which is owned by the mutual fund company Franklin Templeton, said the fund had “gone out of its way to be helpful” to borrowers suffering under lockdowns and that it had worked “quickly to create a framework” that would allow its borrowers to accept government loans. The fund “never asked Mr. Sullivan, or any other borrower, for an escrow of any P.P.P funds, if they were obtained,” she said.	Pholida Barclay, a spokeswoman for Benefit Street, which is owned by the mutual fund company Franklin Templeton, said the fund had “gone out of its way to be helpful” to borrowers suffering under lockdowns and that it had worked “quickly to create a framework” that would allow its borrowers to accept government loans. The fund “never asked Mr. Sullivan, or any other borrower, for an escrow of any P.P.P funds, if they were obtained,” she said.
It is impossible to tell how many borrowers like Mr. Sullivan, their businesses devastated by the pandemic, are wrestling with their lenders for some flexibility so that they can avail themselves of government funds.	It is impossible to tell how many borrowers like Mr. Sullivan, their businesses devastated by the pandemic, are wrestling with their lenders for some flexibility so that they can avail themselves of government funds.
But ironclad contracts and rigid or unresponsive lenders also strained the process of getting government loans for small hotel owners and other real estate businesses that borrow money from the commercial mortgage-backed securities market. In this market, lenders package many mortgages together to create bonds that yield guaranteed regular payments, which they then sell to investors.	But ironclad contracts and rigid or unresponsive lenders also strained the process of getting government loans for small hotel owners and other real estate businesses that borrow money from the commercial mortgage-backed securities market. In this market, lenders package many mortgages together to create bonds that yield guaranteed regular payments, which they then sell to investors.
Close to 7,000 such borrowers have sought help from the companies that service their loans, according to Fitch, a credit ratings agency. They represent a quarter of all the borrowers with outstanding loans from commercial mortgage bondholders and owe a collective $149 billion. Not all of those borrowers are as small as Mr. Sullivan and his partners, and not all of them contacted their servicers asking for permission to accept government help.	Close to 7,000 such borrowers have sought help from the companies that service their loans, according to Fitch, a credit ratings agency. They represent a quarter of all the borrowers with outstanding loans from commercial mortgage bondholders and owe a collective $149 billion. Not all of those borrowers are as small as Mr. Sullivan and his partners, and not all of them contacted their servicers asking for permission to accept government help.
One group of hotel owners in Wisconsin had to file two lawsuits — one in New York and one in Florida — against the banks and other entities handling the securitized loans on their four hotels, just to get in touch with someone who had the authority to let them tap the government’s paycheck program.	One group of hotel owners in Wisconsin had to file two lawsuits — one in New York and one in Florida — against the banks and other entities handling the securitized loans on their four hotels, just to get in touch with someone who had the authority to let them tap the government’s paycheck program.
One of the banks involved in managing the hotel owners’ loans was Wells Fargo. According to the Florida lawsuit, filed by Beechwood Lakeland, the hotel company, the owners tried for more than 10 days in late March to get an answer from the bank about whether they could apply for a government-backed small-business loan. They expected the aid program to open up in less than a week, and they were worried that without the proper permission they would lose their chance to participate.	One of the banks involved in managing the hotel owners’ loans was Wells Fargo. According to the Florida lawsuit, filed by Beechwood Lakeland, the hotel company, the owners tried for more than 10 days in late March to get an answer from the bank about whether they could apply for a government-backed small-business loan. They expected the aid program to open up in less than a week, and they were worried that without the proper permission they would lose their chance to participate.
“As you know, timing is especially important since any delay means the funding for these relief loans could be quickly exhausted,” Mark Arnot, the hotel owners’ general counsel, wrote in an email to Wells Fargo.	“As you know, timing is especially important since any delay means the funding for these relief loans could be quickly exhausted,” Mark Arnot, the hotel owners’ general counsel, wrote in an email to Wells Fargo.
Wells Fargo sent the owners to a different company, Rialto Capital Advisors, to get permission. A Rialto representative sent them back to Wells Fargo.	Wells Fargo sent the owners to a different company, Rialto Capital Advisors, to get permission. A Rialto representative sent them back to Wells Fargo.
~~Updated June 5, 2020~~	Updated June 12, 2020
	States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.
So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.	So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.
A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.	A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.
The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.	The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.
Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.	Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.
Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.	Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.
States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.	States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.	Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.	Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)	If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.	Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.
The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.	The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.	If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.	If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.
For the entire month of April, Wells Fargo and Rialto representatives ping-ponged the owners’ requests back and forth. On May 1, the owners sued the trustees representing the securitized loans. It worked. Five days later, they reached a deal with the various parties that gave them permission to accept the government’s forgivable loans.	For the entire month of April, Wells Fargo and Rialto representatives ping-ponged the owners’ requests back and forth. On May 1, the owners sued the trustees representing the securitized loans. It worked. Five days later, they reached a deal with the various parties that gave them permission to accept the government’s forgivable loans.
“We are committed to our clients and responding quickly to their evolving needs,” said Kelly Reilly, a Wells Fargo spokeswoman. “We have dedicated teams working extended hours during the week and on weekends to meet these needs.”	“We are committed to our clients and responding quickly to their evolving needs,” said Kelly Reilly, a Wells Fargo spokeswoman. “We have dedicated teams working extended hours during the week and on weekends to meet these needs.”
The hotel owners’ experience is typical for borrowers in the securitized mortgage market — largely because multiple players are involved. Borrowers, once they do make contact with the right people, often face a costly series of negotiations. The loan contracts that are standard in the commercial mortgage bond market require borrowers to pay the legal fees for everyone — even the bondholders — whenever they make a request for information, let alone a plea to change the terms of the loan.	The hotel owners’ experience is typical for borrowers in the securitized mortgage market — largely because multiple players are involved. Borrowers, once they do make contact with the right people, often face a costly series of negotiations. The loan contracts that are standard in the commercial mortgage bond market require borrowers to pay the legal fees for everyone — even the bondholders — whenever they make a request for information, let alone a plea to change the terms of the loan.
“Businesses are desperate right now, and they don’t have the time or the money to fight all of the provisions,” Mr. Arnot said.	“Businesses are desperate right now, and they don’t have the time or the money to fight all of the provisions,” Mr. Arnot said.