PPP, take 3

Third round of federal loan program aims to prioritize small lenders

After a renewal of federal funding, a third round of the Paycheck Protection Program launched this week. But a few details about the popular federal loan program have been tweaked this time around to make it more inclusive to smaller lenders and first-time applicants.

“We are so excited to be working already with hundreds of businesses around the state,” said Marisa Barrera, executive vice president of DreamSpring, a community lender that operates in New Mexico.

The PPP, which was established to support struggling businesses and incentivize them to retain employees, provides loans to qualifying businesses and nonprofits that convert to grants if the business meets specific criteria related to employment and compensation levels.

The program allocated around $525 billion in forgivable loans to businesses around the country over two rounds of funding in 2020. John Garcia, district director for New Mexico’s Small Business Administration office, said New Mexico companies received about $2.2 billion through the program last year.

A stimulus package passed in December by lawmakers allocated additional funding to the program, alongside other targeted aid programs.

When the program reopened on Monday, Garcia said initially only community financial institutions — generally small local lenders that serve underserved small businesses — could approve loans.

Garcia said this was a response to large banks sucking up a large percentage of available funds in the first two rounds, leaving fewer resources for businesses that haven’t developed traditional banking relationships.

“To me, that’s really a game-changer,” Garcia said of the prioritization of community lenders.

Barrera said the window gave DreamSpring a chance to lend to smaller companies that need the money, without having to compete with larger banks to get applications through SBA’s system as they did in the first two rounds.

“We don’t have to worry about as much strain on the software system,” she said.

As of Friday, DreamSpring had received 510 applications from New Mexico small businesses and nonprofits, totaling $20.6 million.

“We are ready and able to serve a significantly greater number of entrepreneurs,” Barrera said.

For the first two days of the restart, only companies that haven’t gotten a PPP loan forgiven yet were able to apply.

Companies seeking a second loan were able to reapply starting Wednesday, but with a few restrictions. Access was limited to companies with 300 or fewer employees, compared to 500 or fewer for first-time borrowers. Garcia said second-draw borrowers also need to show a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.

Businesses and nonprofits are able to apply for the program until March 31. While national and state data is not yet available for the third round, Garcia said he’s not expecting the same mad rush for loans that the SBA saw during the program’s initial rollout last April.

“Many businesses have adapted,” he said.