The latest round of the U.S. Small Business Administration”™s Paycheck Protection Program is going much more smoothly than did the first ”” and could obviate the need for another round, according to Fairfield County lenders.
“So far there is a smaller number of businesses that are asking for PPP loans,” Cynthia Merkle, president and CEO of Danbury-based Union Savings Bank, told the Business Journal. “Maybe that”™s a signal.”
“Hopefully as more people get the vaccine, we won”™t need another round,” Tony Giobbi, executive vice president and chief banking officer at Newtown Savings Bank, said. “There”™s also a sense in the market that it could be several months before we burn through all the money.”
The $284 billion in this PPP round — which the SBA launched for eligible lenders with less than $1 billion in assets on Jan. 15 and for all lenders on Jan. 19 ”” is divided into two segments. “First Draw” refers to those who did not receive a PPP loan before Aug. 8, 2020. Those loans are available to a variety of concerns, including sole proprietors, independent contractors, and self-employed persons; any small business concern that meets SBA”™s size standards; and various businesses and nonprofits that meet certain conditions.
“Second Draw” loans are for small businesses with 300 or fewer employees that previously received a PPP loan and will use or have used the full amount only for authorized uses, and that can demonstrate a minimum 25% reduction in gross receipts between comparable quarters in 2019 and 2020. The maximum amount of those loans is $2 million of 2.5 times the borrower”™s average monthly payroll costs, whichever is the lesser.
As of Feb. 3, the SBA reports 891,044 approvals for nearly $7.3 billion, with 4,942 lenders participating; in Connecticut, more than 11,600 businesses have been granted loans totaling over $1 billion.
The third top 2021 PPP lender to date is M&T Bank; the Buffalo-headquartered institution has approved 9,381 loans worth a total of nearly $1.23 billion. (Bank of America has approved the most loans, 35,627, for $1.93 billion.)
“The feel is different,” M&T Market President Michael Weinstock told the Business Journal. “When we engaged with the first PPP portal (launched on April 3, 2020), which was essentially created in 72 hours, we were getting updated information in real time. It was fragmented a little bit.”
Indeed, confusion at many of the banks and among customers led to many of the latter reportedly abandoned their long-term relationships with larger banks, which were slower-footed with processing the loans.
“It was a brand-new program, so there were a lot of questions,” acknowledged Merkle, who also chairs the Connecticut Bankers Association. “That was complicated by the computer system the SBA was using for the program. It was one of their older systems that candidly I don”™t think was ever designed for the kinds of numbers that were coming in from the banks.”
The situation further deteriorated when the program”™s initial $349 billion appropriation was exhausted on April 16. Another $320 billion was added in short order, and it resumed accepting applications from lenders on April 27.
“Depending on how you look at it, this is round 2 or round 3,” Giobbi remarked. “We saw a lot of confusion during the first round as well, but once (SBA) got everything ironed out, it was a just a race for the money, because it was first come, first served.”
Even with all the hubbub, 8,595 Connecticut businesses each received at least $150,000 in loans in 2020; nationwide, some 650,000 companies received loans.
The SBA has acknowledged the confusion of last year, noting that it is continuing to make improvements to its system to improve the program loan review so that small businesses have as much time as possible to access PPP funds.
“The SBA is committed to working with lenders and eligible borrowers to provide the necessary information for follow-up and help get small businesses back on track so that they”™re able to receive another round of PPP loans swiftly,” it said in a Jan. 26 statement. “The SBA encourages borrowers and lenders to work together as quickly as possible to resolve the issues. The SBA will automatically move favorable decisions to approval. During the newest round of PPP, the SBA has already approved over 400,000 loans for approximately $35 billion.”
More efficient, less need?
The process is going much more quickly this time, M&T”™s Weinstock said, partly because “we”™ve all been through this before.” Last year, he said, the bank provided more than $7 billion in PPP assistance to more than 35,000 companies. Part of that work involved expanding its loan-processing team from 20 to over 2,700.
“That involved a lot of education for employees and customers from scratch,” he noted. “And it”™s resulted in things going a lot more smoothly this time.”
The bank also sent messages out to its 170,000 customers to alert them to the new round, “so that everyone is aware of what”™s changed and what”™s available to them.”
Applications this time are coming in at a slower ”” though hardly sluggish ”” pace. “On the first day we had 211 applications come in,” Merkle said. “As of Jan. 27, we had processed close to 400 applications for a little over $44 million.”
Union Savings also set up a dedicated PPP team, she added. “I asked employees to describe this phase versus the first phase, and the key phrase was ”˜less frenzied”™,” she said.
While customers generally better understand the process now, Merkle recalled, “One of our people called a business on a Saturday for more documentation for the loan. After the gentleman picked up the phone and began talking, they could hear someone in the background yelling, ”˜Hang up the phone ”” no banks call on the weekend!”™”
The lenders agreed that the vast majority of current loan requests are of the Second Draw variety ”” 83% of Union Savings applicants, Merkle said ”” with loan sizes averaging about $135,000 to $150,000.
Giobbi said he was particularly pleased that much of the money is being dedicated this time to the restaurant and hotel sectors. “They”™ve had a really hard time of it,” he said. “For them to know that there”™ a life line available for them that will help them be able to stay in business is incredibly important. Small businesses are fundamental to our local economies.”
“This sort of thing is why we”™re here,” Weinstock said. “This is where we put our energies.”
