More than 2,300 small employers in Maine will share $105 million in state grants intended to help businesses and nonprofits survive during the recession caused by the coronavirus pandemic, but fewer applied than expected and more than a thousand applications were denied.

The average award from the first phase of the Maine Economic Recovery Grant program was $45,000, state officials reported Thursday. Grants were awarded to 2,072 businesses and 257 nonprofits. The hospitality sector, especially lodging businesses, accounted for the largest share of recipients, with 35 percent of all awards.

“There is no question that Maine’s small businesses are struggling to survive unprecedented hardships caused by the COVID-19 pandemic,” Gov. Janet Mills said in a statement. “While these funds will not make them whole, they offer some lifeline to keep afloat these small businesses that are the core of our economy. ”

The grant program provided up to $100,000 each to Maine-based employers with 50 or fewer full-time employees. It was funded with $200 million from federal pandemic relief funds provided to the state earlier this year. Grants could be used for eligible business operations such as payroll, rent, mortgage and other expenses.

More than 1,300 grant applications were denied, to the disappointment of some applicants who said they desperately need the money. A second round of funding that is open to businesses and nonprofits with up to 250 employees has an application deadline of next Friday.

Nearly 3,700 organizations applied for grants in the program’s first round, about one-third fewer than expected, which may have been the result of employers not knowing about the program or believing they wouldn’t qualify for aid.

Nancy Smith, the executive director of GrowSmart Maine, said her group will receive $13,000 – about 6 percent of her annual budget – from the state program.

“It’s like Christmas!” Smith exclaimed.

Like other groups, GrowSmart Maine’s fundraising has been disrupted, Smith said, and it has been forced to adapt because of the pandemic. The organization, which works to help residents and communities adapt to and manage growth, has an annual budget of about $210,000. She said it now has only two workers on staff after one employee took another job this summer. She said the grant will give her the confidence to start looking for a replacement.

“For us, that’s significant,” Smith said about the grant. “It’s going to be incredibly helpful. This grant from the state is critical.”

The Wells-Ogunquit Resort Motel & Cottages was one of the employers included on a list of grant recipients provided by the state Department of Economic and Community Development. Owner Peter Proach said he had not been informed of the award and wasn’t sure how much he stood to receive, but he said anything helps after a disastrous tourism season.

“It was worse than we thought it was going to be,” Proach said.

Many of the motel’s perennial guests are from Massachusetts and did not feel like visiting Maine this summer because of COVID-19 testing or quarantining requirements imposed on Bay State residents until last month. Proach said he’s looking forward to a better season next year.

“Anything is appreciated,” he said. “We are looking at a fairly substantial downturn in the economics of this year; it will help us to be prepared and get ready for next year.”

Roughly 1,330 applications were denied because they did not meet program standards, DECD Commissioner Heather Johnson said. The leading reasons for denial included not meeting a 20 percent loss threshold after including federal assistance, omitted financial data or being part of an ineligible market segment, Johnson said.

“We have made some changes in Phase II, which will hopefully allow some of those applications to be deemed eligible, including adding July and August information and increasing the (maximum) number of employees,” she said in an email.

Denial from yet another economic relief program was a disappointment for Rosa Noreen, who owns Bright Star World Dance in Portland. Noreen owns the studio but doesn’t have any employees – dance teachers rent time and space, and she uses those fees to cover rent and expenses, about $25,000 a year, she said.

That puts the business in a strange position, since it has no annual profit to speak of and no payroll records.

“The problem we are running into is that we don’t look like we are very affected, because we don’t have a big profit to begin with,” Noreen said.

Maine’s grant program determined eligibility and awards based on an organization’s individual losses proportional to losses for the entire group of applicants.

Right now, the studio is holding on with some online classes and a break on rent from her landlord. Noreen doesn’t think holding full, in-person classes is safe but is trying to rent out the space for one-on-one classes as an online studio or for personal workout and dance space.

Getting shut out of the program is doubly frustrating because it was advertised as a way to help organizations that missed out on other aid such as the federal Paycheck Protection Program. Noreen said she was shut out of that program and has yet to receive unemployment benefits.

“I’m certainly not tied to any sort of thinking (that) I am guaranteed to get any grant I apply for, but I haven’t gotten anything I’ve applied for,” she said.

Nicole Avery, executive director of Big Brothers Big Sisters of Southern Maine, said she was disappointed but not totally surprised to get the email telling her that her organization’s request for aid was turned down.

“We knew going in that it was a stretch for eligibility,” she said.

Avery said that the email told her the application was denied because her organization received a Paycheck Protection Program loan and its financial statement showed an endowment it has used to cover expenses. Avery expected both factors to weigh against the application.

Still, the news was disappointing because the organization has been hit with fundraising hurdles because of the pandemic. An annual fundraiser held online brought in only about 40 percent of the typical amount, and a late-summer golf tournament raised only about half of what it normally would.

“We have great donors and they’re sticking by us,” she said, although the organization had to let one staff member go and is looking to sublet its office space in Westbrook to cut costs.

The Greater Portland Council of Governments, one of seven economic development districts that processed the grants, said about 60 percent of the 1,100 applications it received have been approved so far. Roughly $35.5 million in grant funding is headed to the Portland region.

A second phase of the program, open to businesses and nonprofits that employ up to 250 workers, was announced last month. Grants will be made with the $95 million remaining from the first phase of the program, and it is open to licensed childcare and behavioral health organizations and those less than one year old.

The deadline to apply is Oct. 23. The state had received 480 applications as of Thursday.

“We’re expecting those businesses whose applications were determined ineligible to apply again in the second round,” said Tom Bell, spokesman for the Greater Portland Council of Governments. “Applications for the second round have been trickling in, but we expect an increase in the coming days as businesses whose applications were not approved reapply.”

Staff Writer Ed Murphy contributed to this report.

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