Just when Kal Narvilas thought his loan applications were about to be approved, his bank broke the bad news: there was no more money.

The $ 349 billion paycheck protection program, apparently set up to help small businesses and their employees cope with the economic fallout from the coronavirus pandemic, was sold out within days. Narvilas is now waiting for help as bills pile up as the doors to its restaurants remain closed amid a lockdown in New York City.

Narvilas had spent hours sifting through months of paperwork filling out PPP applications for its independent restaurants – Uptown Garrison and Saggio in upper Manhattan, and Cent’Anni and Midwood Flats in Brooklyn. Although the process was tedious, he managed to file his case soon after the program was launched, and his correspondence with TD Bank suggested his applications were in the process of being approved, he said.

“I was about to be approved and get this money and the door was closed on me, so it was a little demoralizing for me,” Narvilas said. He hopes his demands will be at the top of the TD bank pile when the next round of federal funding arrives and the program is back up and running.

Congress approved an additional $ 310 billion for PPP loans and $ 60 billion for disaster loans this week, but it’s not clear that that’s enough to cover demand in the coming days. Only 20% of submitted applications were fully processed with money sent to borrowers, according to the National Federation of Independent Businesses. The program is scheduled to resume Monday at 10:30 a.m. ET, according to the Small Business Administration.

“We are sitting in an imaginary queue hoping there is money to fund us all,” said David Helbraun, founding partner of Helbraun Levey, a law firm that represents more than 1,000 clients in the world. New York hospitality industry.

Loans are an essential lifeline for restaurants and bars, which are at the center of economic benefits of the coronavirus pandemic. The industry has lost 417,000 jobs after establishments shut down to comply with social distancing rules and stay-at-home orders. It’s about 60% of 701,000 jobs lost nationwide in March.

“They are the most difficult people you will ever meet, and I have never seen my clients so nervous and nervous,” Helbraun said. One of the biggest issues for restaurant and bar owners since the lockdown began has been confusion and uncertainty surrounding the PPP loan approval process, he said.

Lauren Lynch, one of Helbraun’s clients, applied for loans for its three restaurants and bars in Harlem through Chase Bank when the first round of funding was already sold out. Lynch received an email from Chase last weekend informing him that there were 100,000 applications before hers. Despite the huge backlog, she is optimistic that the loans will go to her businesses – Harlem Public, The Honeywell and At The Wallace.

“I think the jar has been filled enough,” said Lynch. “There have been enough reviews that small businesses will receive more of this money than last time around – I think the big banks are better prepared this time around.”

During the first round, several publicly traded restaurant chains received PPP loans, which many independent restaurateurs believe violates the spirit if not the letter of the law. Ruth’s Chris Steakhouse said he would return a $ 20 million loan and Shake Shack said it would be pay off a $ 10 million loan after the public controversy. The other public enterprises are the Small Business Administration released new guidelines on Thursday aimed at discouraging listed companies from receiving money this time around.

James Lee, owner of three restaurants in upper Manhattan, isn’t as optimistic as Lynch. He applied to Fountainhead on the day the loan program was launched and the lender acknowledged that his three requests had been received. About a week later, Lee received a mass email from Fountainhead informing him that there was a surge of applications. He asked him to be informed if he decided to withdraw from the queue and apply at another bank.

Lee saw the writing on the wall at Fountainhead and applied with Chase on April 16, the day the federal funding ran out. Wednesday, Chase sent a mass email to Lee and other candidates, saying the second round of PPP “funds could run out quickly.” The bank told Lee that there was “an extremely large volume” of applications ahead of him, and that it was providing him with this information in case he wanted to try applying to another lender.

“Asking for these loans is like trying to win concert tickets,” said Lee, owner of 181 Cabrini, Buddha Beer Bar and Buddha Taco Bar.

The Consumer Bankers Association, which represents the country’s major retail banks, estimates that it will take $ 1 trillion to meet demand from small businesses. Richard Hunt, CEO of the association, expects the second round of funding to end in about four days, if the system doesn’t go down due to the huge demand. He expects 1.3 million loans to go to the SBA for approval, on top of the 1.6 million that was approved before funding ran out last time.

“This is an unprecedented situation – the demand for this product is off the charts,” Hunt said.

Small business owners who didn’t apply in the first round aren’t as likely to get funding this time around due to the backlog of applications, Hunt said. He understands the frustration of small business owners, but said the banks are working as quickly as possible to process all requests.

“We have moved heaven and earth over the past three weeks working 24/7 to start the process so people are helped during this crisis,” Hunt said.

While the $ 310 billion in PPP funding is enough to meet demand, restaurateurs like Lynch say loan terms carry risk and make it difficult to use the money to pay growing bills.

The borrowers are eligible for loan cancellation if they keep their employees at the same level of pay and use 75% of the money to cover salary costs. The remaining 25% can be used for rent, utilities, or mortgage interest.

Lynch said the problem is that the federal government has also increased unemployment insurance by $ 600 per week, which makes it difficult to persuade staff to return. Besides the money, some people do not feel safe to return given the health risks from the coronavirus, and other staff are simply not available because they have fled the city, a- she declared.

Many restaurateurs would like to use more money to pay basic bills such as rent, utilities, and vendors.

“They need to relax the 75% rule and allow small business owners and restaurateurs to use that money as they need it,” Helbraun said. “What is happening now is restaurateurs and small business owners becoming offices of unemployment,” he said.

For loans to be canceled, money must be allocated to qualifying expenses over an eight-week period, creating additional pressure. Lynch said she might not be able to meet the conditions for rehiring staff in such a short time, meaning loans likely wouldn’t be canceled and she would end up in debt as sales collapsed. That’s why she didn’t apply for PPP loans the first time around – she wasn’t ready to bring in staff yet.

Lynch also expressed frustration that the rules remain vague and that there aren’t really any concrete guidelines from the SBA. The SBA did not immediately respond to CNBC’s request for comment on the guidelines.

“Different lawyers have opinions on how to get forgiveness, and accountants are the same,” she said. “There is a ton of confusion that needs to be ironed out. And there needs to be some lean parameters on this eight week case.”

Lynch is concerned that small restaurateurs will trip over loan terms and therefore not be eligible for a rebate. This could lead to an increase in the debt burden six months from now, when the deferral period is over, ultimately forcing some small business owners into bankruptcy, she fears.

“There’s going to be a whole other wave of economic fallout,” Lynch said.