Exclusive PPP Window Opens for Smallest Businesses
UPDATED 10:45 a.m. – Comments from Terry Louk at Valley Economic Development Partners
YOUNGSTOWN, Ohio – A two-week window that opened Wednesday will give the smallest businesses exclusive access to the Paycheck Protection Program. Through March 10, only businesses and nonprofits with 20 employees or fewer will be able to apply for PPP funds.
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, there have been 55,638 loans approved for $4.33 billion. According to the agency, 18% of loans have been to businesses in food service and hospitality, while 13% have been to those in construction.
On Feb. 24, the SBA started 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 the Paycheck Protection Program and bankers report that the smallest businesses are the ones that 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’s stood out, he adds, is that the typical loan size is much smaller than the first time through.
The “conventional thinking” of the banking industry, says Farmers National Bank chief credit officer 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. We’ve had, we think, some good success.”
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,” he adds.
For 717 Credit Union, there isn’t a comparison to be made to the first round, as 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. Vice president of lending Bill Fulk says that from what his staff have seen, how well a business is weathering the pandemic depends largely on how big they are.
“Larger businesses seem to be on pretty good footing at this time,” he says. “What’s really 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 take part in the first round, it directed interested members to other institutions, including Valley Economic Development Partners. In Round One, the agency provided 120 PPP loans totaling $2.32 million. This time, says director of SBA lending Terry Louk, that value is already around $8.1 million.
“With the requirement for a second draw needing a 25% reduction [in revenue], for the most part that’s making sure it gets to the folks who need it. Twenty-five percent is pretty big. Imagine taking that kind of hit personally,” he says. “What we’re among first draw borrowers is that it’s people who were hesitant the first time around or people who applied and didn’t get money.”
The bankers say clients 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. The familiarity with the program has changed.”
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