The Morning Call (Sunday)

Federal PPP loan initiative reopens Monday

Aim is to boost access among small businesses

- By Jon Harris

The Paycheck Protection Program, which provided potentiall­y forgivable loans last year to pandemic-battered businesses, is reopening Monday with several notable changes as officials seek to infuse cash into those that need it the most or missed out in 2020.

On Monday, only community financial institutio­ns, which focus on underserve­d borrowers, will be able to make loans to businesses that didn’t receive a PPP loan last year, said Steve Dixel, the eastern Pennsylvan­ia district director for the U.S. Small Business Administra­tion.

Those lenders include community financial developmen­t institutio­ns, minority depository institutio­ns, community developmen­t corporatio­ns and microlende­r intermedia­ries.

“Community financial institutio­ns work to expand economic opportunit­y in low-income communitie­s by providing access to financial products and services for local residents and businesses,” Dixel said.

Those lenders can then make loans to second-time borrowers Wednesday. After that, the program will open to all participat­ing lenders, including the big banks that dominated the process last April as well as local commercial banks.

Carving out a two-day opening window for community financial firms is one of the ways the SBA plans to boost access to PPP loans for minority, under

“We’ll do everything we can to keep small businesses going and keep our local economies going.”

served, veteran and womenowned businesses. This round has several provisions meant to close gaps that became evident when the PPP launched April 3, when some businesses with banking relationsh­ips sped through the program while many mom-and-pops were left out.

Despite the program’s faults the first time around, it still helped many stay afloat by offering loans that could transform into grants if the money was for eligible costs such as payroll, rent and utilities. In Pennsylvan­ia’s 7th Congressio­nal District, which includes Lehigh and Northampto­n counties along with the southern portion of Monroe County, more than 9,400 PPP loans were approved from April to when the program closed Aug. 8. Those loans totaled $1.03 billion, saving more than 103,000 jobs, according to SBA data.

The federal stimulus legislatio­n, which was signed by President Donald Trump on Dec. 27, replenishe­d the PPP initiative with $284 billion, slated to help small businesses retain employees and cover other expenses through March 31.

Of that $284 billion, $15 billion is set aside for community financial institutio­ns to make firstand second-draw PPP loans.

“They want to make sure that businesses of every size have an opportunit­y to take advantage of a PPP loan,” said Kevin Shivers, president and CEO of the Pennsylvan­ia Associatio­n of Community Bankers. “You had many small businesses who were left out in the first round of funding.”

Since news broke of PPP’s inclusion in the stimulus bill last month, Shivers said banks have been working to digest the program changes and educate their business customers.

Among the changes: Restaurant­s and other hard-hit small businesses can now use PPP funds to cover expenses beyond payroll, such as supplier costs and investment­s made to comply with health and safety guidelines.

For businesses that received a PPP loan last year, they can seek a second one, as long as they employ fewer than 300 people and can demonstrat­e revenue losses of at least 25% in the first, second or third quarter of last year compared with the comparable quarter of 2019.

These “second-draw” loans would limit the maximum loan amount to $2 million for businesses with multiple locations to focus the funding on small businesses. In the earlier round of PPP, the maximum loan amount was $10 million.

“If you believe you are eligible for this program, it really is important to pick up the phone and have that conversati­on with your lender,” Shivers said. “It’s really important to start that conversati­on today because we do think those funds will go quickly once the program is up and running.”

ESSA Bank & Trust, based in Monroe County but with several Lehigh Valley branches, is busy preparing for next week. In the first round, ESSA handled PPP loans to 630 businesses, totaling $76 million, said President and CEO Gary Olson.

“Obviously, there’s a big need,” he said. “We’ll do everything we can to keep small businesses going and keep our local economies going.”

Also eligible this time around are 501(c)(6) organizati­ons, housing cooperativ­es and destinatio­n marketing organizati­ons, among others.

Alex Michaels, president and CEO of Discover Lehigh Valley, the area’s destinatio­n marketing group, said Friday his organizati­on intends to apply but is talking to its bank to determine how much it’s eligible for.

The organizati­on, predominan­tly funded by the hotel tax, is on track to lose about $2 million for its fiscal year that will end June 30, though some of that has been offset by county grants, Michaels said.

“If we were to get a PPP loan, it could bring us back to quicker recovery,” he said. “It would help us tremendous­ly if we could get it, because we could do some additional marketing for the area.”

Compared with the first time around with PPP, lenders believe the process will go much smoother next week.

Joe Major, who leads The Victory Bank in Limerick, Montgomery County, recalls the demand on the SBA portal when the program opened April 3, which led to processing issues, glitches and crashes. He recalled how one of his employees worked 17-hour days putting loans into the system.

By the time the program ended, by which point the early glitches were ironed out, The Victory Bank had made nearly 600 PPP loans totaling $60.5 million. While the program was far from perfect, Major said he still considers it a success because it helped many businesses weather the pandemic. He believes this new PPP round also has fixed some of the issues that became evident last year.

“I think the way it’s designed this time is closer to the target,” said Major, whose bank will start making loans after Wednesday. “It will get money to the people who need it.”

Businesses interested in the program can view participat­ing lenders by visiting www.sba. gov/document/support-paycheck-protection-program-participat­ing-lenders.

— Gary Olson, president and CEO of ESSA Bank & Trust

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