Maine economic development officials have amended the application for the second phase of an emergency grant program shortly before the deadline for applications, after struggling small businesses and nonprofits questioned confusing language that may have cost them a chance at aid in the program’s first phase.

At least one restaurant believes it was denied a grant last month under the state’s $200 million Economic Recovery Grant program because it answered a question about its 2020 gross revenue without subtracting some business costs as the state intended but did not make clear on the application.

Others are concerned the application did not take into account the staff and expense cuts employers made to stay afloat during the pandemic. Some said they are baffled by the state’s denial of their application while their business is fighting for survival.

Tara Barker, co-owner of 40 Paper in Camden, said she followed the instructions on the application when she applied for a grant this fall. Based on her restaurant’s poor performance this year, Barker was sure she’d meet the grant eligibility threshold of at least a 20 percent loss of business in the first six months of the year.

Instead, her application was denied because she had made too much, the state said. Barker got a copy of her application and saw what went wrong.

The state asked for “gross revenue” for three prior years based on the line on tax forms that includes business deductions for the cost of goods sold – supplies bought to prepare food or products – returns and rent or dividend income.

But when it came to 2020, the state just asked for “gross revenue” without instructing applicants that what it intended was for them to subtract the same deductions.

Barker said she wanted to follow the instructions to the letter because she didn’t want to risk getting in trouble for supplying inaccurate financial information, so she put down her gross revenue, excluding deductions. That meant her application showed $30,000 more in revenue than she actually made, Barker said.

“When no one has the figures for their tax return, the term gross revenue means all the gross receipts, all the initial money that comes in,” she said. “They just asked for gross revenue and expenses. It inflated what looked like a profit for the first six months of the year.”

The Maine Department of Economic and Community Development awarded $105 million in economic recovery grants to 2,300 small businesses and nonprofits in the first phase of the program. More than 1,300 businesses and nonprofits were denied, roughly 40 percent of total applicants.

The deadline for second-phase grants, with $95 million available, is Thursday. So far, at least 1,130 applications have been submitted.

Barker has reapplied for a grant and said she feels better about her chances this time. But she fears other applicants who were denied in the first phase will be too discouraged to try again.

“I am worried that they will run out of money before the companies that needed the money in Phase I have the chance to get their applications in again,” she said. “It doesn’t seem fair – I don’t want small businesses to close.”

The Department of Economic and Community Development amended its online grant application and added a section to the frequently asked questions section on its website to clarify the 2020 revenue question. It also sent a notification of the clarification to all Phase II applicants.

In the example provided by DECD on its website, a business that generated $50,000 in revenue should then subtract customer returns and the cost of goods sold, and add any rent, royalties, interest, dividends or gains. In the hypothetical example provided, those deductions and additions would drop the revenue figure used to judge eligibility to $35,000 – a 30 percent difference.

Without reviewing individual grant applications, it is impossible to say how many businesses answered the 2020 revenue question incorrectly in the first round, but it is one of the most common questions her department has to clarify, DECD Commissioner Heather Johnson said during an information session Monday.

“It is lining up with 2020 revenue and expense with prior years, making sure people put down the same things for 2020 revenue they pulled from the prior tax years,” Johnson said.

The grant program was rolled out in late August, funded with $200 million Maine received from the federal CARES Act. The first tranche of grants was available only to Maine-based organizations with 50 or fewer employees, and it excluded some nonprofits such those dealing with assisted living and childcare.

The second phase, announced last month, opened applications to companies with up to 250 employees, expanded nonprofits’ eligibility and set aside $5 million for new businesses.

Holly Ferguson, a principal at Portland accounting firm Albin, Randall & Bennett, said it should have been clear to applicants what revenue the state was asking for.

“They use the same wording when they are asking for tax returns” for previous years, Ferguson said. “You definitely could interpret it differently, but if you are following along what they are asking for, you would think they would want something similar for 2020.”

But Chris Linder, CEO of Maine Stream Finance, a lending and business development nonprofit in Bangor, said the language on the application could be hard to understand.

Other parts of the application raised red flags, Linder said. Businesses could show revenue and expenses, but they only had a narrative section of the application to indicate the costs they cut because of the pandemic – such as laying off staff, selling inventory or delaying vendor payments.

“If the state (officials) just look at straight revenues minus expenses and see a profit or not a big financial loss, they might say ‘they don’t need our help,’ but that doesn’t reflect all the hard decisions (the business) made,” Linder said.

Peter Leavitt works at Leavitt & Sons Deli in Portland’s Bayside neighborhood on Monday. Leavitt says that even though business has fallen off by about 40 percent, the state denied him an economic recovery grant. Gregory Rec/Staff Photographer

That’s what it feels like for Peter Leavitt, owner of Leavitt & Sons Deli in Portland and Falmouth. He said he’s cut expenses to the bone and laid off staff to get his revenue to a bit above break-even.

That negligible revenue plus a Paycheck Protection Program loan, of which he expects to have to repay at least half, sank his chances for a grant, he said.

“It is not giving an accurate picture of how far off my business is,” Leavitt said. “Even top line revenue, you can see it is off. Are they waiting for people to go out of business? It is too late for a lot of people, and it doesn’t take into account that winter is coming and anyone in the food business will have to curtail even further.”

Some small businesses are still baffled as to why they were denied a grant in the first round, and they don’t think reapplying will change anything.

The pandemic has been brutal for Michelle Souliere, owner of The Green Hand Bookshop in Portland. She reopened after an extended closure and is running a used-book store online, in addition to selling new books to help boost the bottom line.

“We wound up working overtime and having half the revenue – we are working more hours and getting less income,” Souliere said.

She imagined her business would be a poster child for the grant program. It was a surprise when she was denied a grant, based partially on an emergency federal loan she took out. The application numbers made it look like revenue was down 50 percent from previous years, Souliere said.

“I don’t know what formula they used in their final calculations, because clearly it does not match the information we provided on the application,” she said. “If it really is a working system and people who did qualify had much more heinous losses than we, then I get that. We’re barely surviving – if anyone is doing worse then us, they are really in danger.”

Related Headlines


Only subscribers are eligible to post comments. Please subscribe or to participate in the conversation. Here’s why.

Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.