New Round of PPP Reaching Smaller Businesses

YOUNGSTOWN – Since it opened Jan. 11, the new round of the Paycheck Protection Program hasn’t been the free-for-all it was the first time around. New eligibility requirements and application windows were put in place to ensure the smallest businesses and those the pandemic hit hardest would have the chance to get funding.

As of Feb. 21, the Small Business Administration reported that 1.9 million PPP loans had been approved for a total of $140.28 billion, with nearly 72% being loans under $50,000. In Ohio, 55,638 loans had been approved for $4.33 billion. According to the SBA, 18% of loans went to businesses in food service and hospitality, while 13% went to those in construction.

On Feb. 24, the SBA began a two-week window exclusive to companies and nonprofits with fewer than 20 employees, part of an effort to ensure the smallest companies have a chance to access the program. At local banks, there’s still plenty of interest in PPP and bankers report the smallest businesses need the most help.

“This round is very specific about a drop in revenue of greater than 25% within a quarter. So not as many companies qualify. Those hard hit industries will easily qualify: travel, restaurants, gyms, brick-and-mortar retail and those who can’t have an online presence,” says Stan Feret, chief lending officer at Cortland Bank.

His institution has processed about 230 PPP applications in the current round, about half of what Cortland Bank saw through the initial program, open from late March through August 2020. What stands out, Feret says, is that the typical size of a loan is much smaller than the first time through.

The “conventional thinking” of the industry, says the chief credit officer at Farmers National Bank, Tim Shaffer, is that banks would see PPP lending at about half the level of Round One “because of limiting criteria.

“We’ve seen it ourselves that businesses who qualified the first time don’t qualify this time, either because of revenue or some other reason,” he says. “We expected less volume and we’re tracking toward that 50% mark.”

Application levels at Farmers have been steady through the first two-thirds of the application window – which closes March 31 – and “not the madness you saw in Round One,” Shaffer adds.

For 717 Credit Union, there isn’t a comparison to be made to the first round because the institution opted not to participate. For the second round, however, 717 had processed about 100 PPP loans as of the first week of February. Its vice president of lending, Bill Fulk, says that from what he’s seeing, how well a business is weathering the pandemic depends largely on its size.

“Larger businesses seem to be on pretty good footing at this time,” he says. “What’s interesting is that as we’re working through PPP loans for smaller businesses, it’s a totally different story. Some are doing OK. But I’d say the smaller they are, the more they’re struggling.”

While 717 didn’t participate in the first round, it directed members to other institutions such as Valley Economic Development Partners. In Round One, the agency provided 120 PPP loans totaling $2.32 million. This time, says its director of SBA lending, Terry Louk, that value is already at $8.1 million.

The bankers say customers are often better prepared than they were in the early days of the PPP last spring. Much of that has to do with a familiarity with the program and having the requirements established well in advance, rather than the SBA rolling out rules as questions arose.

“The bigger companies have already planned this out with their accountants. They knew whether they’d be able to apply or not. We had those conversations early on,” says Josh Toot, commercial banking manager for Premier Bank. “In Round One, everyone was calling the bank wondering if it was too good to be true.”