Bankers and small business owners are gearing up once again as Congress nears approval of legislation adding billions of dollars to the Payroll Protection Program.
Small businesses left on the sidelines after the first $349 billion of PPP funding went dry on April 16 are hoping they will be able to get a much-needed loan this time. Bankers, who worked around the clock to get loans approved during the first round, aren't expecting the second round to last long.
The PPP, created under the $2 trillion stimulus package enacted March 27, intended to provide fast cash to small businesses impacted by Covid-19 to use for payroll and other expenses such as utilities and rent. The loans, distributed through banks, have a 1% interest rate and are forgivable if recipients meet certain conditions.
As the program ran out of money in less than two weeks, Congress began moving to appropriate additional money. The U.S. Senate approved $310 billion in additional funding for the program on April 21. The House is expected to vote on the legislation on Thursday.
"The first round was remarkable if you put it in context," said Merrick Benn, a partner at Womble Bond Dickinson. "The SBA ran out of funds even with hiccups. $350 billion is what the SBA had done in [the] previous 14 years. Think about that, they did 14 years worth of loans in a 13-day period."
Another 4,923 completed applications for loans totaling $658.9 million in funding are waiting in the queue, according to a survey of 22 community banks by the Maryland Bankers Association.
Those figures underrepresent the state’s total small business PPP application pipeline because the national and regional banks typically report at the national level, said Kathleen Murphy, CEO of the association.
"Maryland’s banks stand by Maryland small businesses and are prepared to do everything they can to deploy this new, critical funding quickly, helping to save jobs and limit the economic impact resulting from the COVID-19 emergency," Murphy said.
Time and again, bankers said business owners should have all of their documents organized and ready to speed up the process. They also said businesses should work closely with their accountants.
Rosedale Federal received SBA approval for 162 loans totaling $25.3 million. The bank had 94 loans totaling $5.4 million in process when funding ran out. Benson said the bank has hundreds of applications waiting to be processed, so if applicants have their documents together and make sure they're accurate, he and his staff can move through them more efficiently.
"The less touches you have in this environment, the better," Benson said.
Augie Chiasera, president of the Greater Baltimore and Chesapeake region for M&T Bank, also said business owners should be able to justify their loan request.
"It’s very important that business owners have the backup justification for the numbers that they are putting in the program," Chiasera said. "Having the data and the backup with it just makes a lot easier to verify and get processed."
Benn also said businesses should have justifications and "backup" for the information they provide so they can prove why they needed the loan in case the SBA has questions later.
"The lawyer in me is always concerned about making sure that a business can make proper certifications," Benn said. "My concern is that when the dust settles on all this and people start questioning who got the money, businesses need to be prepared to back up that statement with some real analysis."
Another key to success for businesses is having a direct line of communication with a banker. In this regard, businesses that used community banks enjoyed success during the first round. While the big banks processed hundreds of thousands of applications, many more were left sidelined and had trouble reaching someone.
The bill moving through Congress will set aside $60 billion of the additional funding for lenders with less than $50 billion in assets, including $30 billion for banks with less than $10 billion in assets.
David Rosen, a partner at Rosen Sapperstein & Friedlander, said community banks are able to better streamline the process. However, he said business owners shouldn't necessarily apply to multiple banks for loans.
"Try and pick the horse and ride that horse," Rosen said.
Marketing agency Unconquered was able to get a loan from M&T Bank. CEO Brian Schneider said he applied early and was in almost constant communication with both his banker and his accountant to make sure he got the right documents together.
"It took about six hours to gather information and present it properly," Schneider said. "I wrote a statement to provide clarifications suggested by my accountant...When I submitted it to M&T, there were no questions back."
Businesses should also be ready to go as soon as the program is relaunched. Benn said those that already applied should not withdraw their applications, but check with their bankers to confirm applications in the queue will move first in the second round.
"Get your ducks in a row and have the application ready so you can click send when it goes live," Benn said. "Don’t leave anything to chance."
By Holden Wilen
Reporter, Baltimore Business Journal - Apr 22, 2020, 4:27pm EDT