PPP’s extension gave borrowers needed time to apply, funds expected to dry up before end date

An extension to the Paycheck Protection Program (PPP) from March to May allowed more time for small firms and businesses looking to draw from the program for a second time to benefit from it. But without additional funds, the program is expected to dry up soon.

The newest wave of PPP loans began early this year and was signed into law by President Trump in December.

The third round of the program allowed businesses to apply for a second PPP loan if they had 300 or fewer employees, demonstrated a drop in revenue for one calendar quarter compared to the previous year, and showed they used all of their first-round money.

Late last February, the Biden administration revised PPP small business loans to reach smaller, minority-owned firms. However, the federal business loan program was scheduled to end just a month after businesses had a chance to cash in on the significant increase in funds they would receive.

It also gave businesses who were unable to apply for the first round of loans a chance to do so, but because of an eight-week hold on applying for a second round, many of those businesses would have been unable to apply for their second round by the March end date.

Biden signed the PPP Extension Act of 2021 in late March, allowing borrowers to continue to apply for PPP loans until May 31. At the time the act was signed, the Small Business Administration (SBA) had already approved nearly $196 billion out of the $290 billion in funds set aside for the program.

Between businesses applying for their second loan at a max of $2 million and small businesses now borrowing against their gross income rather than their net profit thanks to the new PPP rules approved by the Biden administration, the program is expected to be out of money weeks before the new deadline.

“For the last month and a half the burn rate has been $10 billion a week,” said David Patti, director of communications and marketing at Chester County-based Customers Bank. “The guy who could qualify for $1,000 now qualified for $10,000. That unleashed pent-up demand and there are now a lot more people in line.”

As of April 26, the SBA reported having $18.5 billion left in its PPP loan pool, according to Patti.

Despite the swiftly dwindling funds, the extension has proven to be beneficial for borrowers newly eligible for the program, said Jeramy Culler, vice president and business banking manager at F&M Trust in Chambersburg.

“The changes were made late in this round of the program, and the additional time allows borrowers who were previously ineligible to compile their information and submit applications,” said Culler. “It also provides additional time for those borrowers who didn’t receive a first-draw loan until 2021 to meet the use of funds criteria for a second-round loan. I expect there to be continued interest from borrowers until the money is exhausted or May 31, whichever comes first.”

Banks also had more time and resources to manage the loan applications coming in from borrowers since the first wave of PPP was already behind them.

Last year, lenders had two weeks to prepare for the bevy of borrowers that would knock on their doors. This year, banks were able to take advantage of their experience from 2020, said Matthew Long, chief operating officer of Ephrata National Bank.

“That was in the height of COVID. We weren’t sure what to do from an employment perspective,” he said. “We did a very manual labor-intensive process to do it quickly. As we looked at this further and moved into the second wave, we took advantage of tech because we had more time on our side to reevaluate.”

Recently the SBA launched a new round of Economic Injury Disaster Loan assistance to provide $5 billion in additional assistance to small businesses and nonprofit organizations impacted by the pandemic.

This and other programs such as the $28.6 billion Restaurant Revitalization Fund are part of more targeted aid for businesses compared to the broader PPP, which could help lift up businesses hit hardest by the past year, said Patti.

“The Biden administration thinks it’s time to focus on hotels, restaurants and others and that’s all fair to now say ‘Let’s get help to the people who have lingering problems or problems unique to their sector and be much more tailored to their policy,’” he said.

The truth behind popular misconceptions about the PPP

The federal Paycheck Protection Program (PPP) application deadline has been extended to May 31, offering small businesses another opportunity to secure critical funds to curb the economic ripple effects of the pandemic.

Originally scheduled to expire March 31, this new legislation signed last month by President Biden puts a lot of money back on the table. Since its creation a year ago, the U.S. Small Business Administration (SBA) has approved more than 8.2 million loans totaling $718 billion. More than $50 billion remains available.

Although many lenders have reopened their PPP application portals, some small-business owners are still sitting on the sideline, having doubts about whether the program is right for them. They might not know if they qualify, and they might have concerns about the process related to loan forgiveness.

Here are five myths about the PPP – and some information that could help to clear up any misconceptions before the clock runs out.

MYTH #1: The PPP is just for big businesses.

FACT: If you’re considering your first PPP loan and have fewer than 500 employees, you’re eligible for a PPP loan. In fact, even if you have no employees, the program may be available to you (see myth #2).
As of August 2020, 75% of businesses that had received PPP loans had nine or fewer employees, according to the U.S. Small Business Administration (SBA). Furthermore, nine out of 10 loans were for $150,000 or less.

MYTH #2: I can only get the PPP if I have employees.

FACT: If you run a business, even as a sole proprietor or an independent contractor, you may be eligible to apply for a PPP loan. Meet with your business banker to discuss your options and eligibility.
If your business has filed a 2019 or 2020 tax return (Form 1040 Schedule C for 2019 or 2020 for independent contractors), you can apply. Those without employees will need to submit IRS Form 1040 Schedule C to report your net business income.

MYTH #3: My business probably won’t meet the credit and eligibility requirements.

FACT: If your business was in operation Feb. 15, 2020, you have already met a key eligibility requirement. From there, you will need to provide documentation showing that you were in business and demonstrating payroll.

Small businesses owners may also worry that their credit status could keep them from getting a PPP loan. Although you will apply through a lender, there is no credit check requirement when applying for a PPP loan.

MYTH #4: If you have other SBA financial assistance, you can’t get a PPP loan.

FACT: Business owners can apply for the PPP and other SBA financial assistance (including the Shuttered Venue Operators Grant), such as the Economic Injury Disaster Loan (EIDL) and Section 7(a) loans. However, you can’t use your PPP funding and your EIDL loan for the same purpose, such as payroll. Note: An EIDL loan must be repaid.

And, while each program has its own requirements, don’t let the idea of applying for one loan sway you from applying for the other. Now is the time to use all the resources available to you. Just make sure you follow the guidelines of each program and maintain your documentation on how you’re using each loan.

MYTH #5: The forgiveness process is complicated and won’t apply to my business.

FACT: The keys to loan forgiveness are understanding the requirements of the program and maintaining the appropriate documentation.

First, full forgiveness of your PPP loan is not guaranteed. However, if you use the PPP loan proceeds as required by the PPP rules, your loan should be forgiven. If some or all your PPP loan cannot be forgiven, the terms of the loan are better than most at 1% APR for 60 months with payments deferred up to 10 months following the end of the chosen covered period. If you apply for forgiveness prior to the end of your deferment, the deferment ends when loan forgiveness is remitted by the SBA or if the loan forgiveness is denied, when the decision is communicated.

The SBA also recently released new guidance and forms to make forgiveness much simpler for loans under $150,000. Be sure to ask your banker about this or consult the SBA’s website prior to applying for forgiveness.

The PPP may not be the answer for every business, but it is worth considering. Speak with your banker for additional information on SBA programs or consult your attorney, CPA, or other advisor to help determine eligibility.

Jess Seburn is M&T Bank’s regional manager for business banking in Central Pennsylvania.

Customers Bank turns to fintech to help small businesses with PPP loans

During the first round of Paycheck Protection Loans last year, Customers Bank of West Reading was able to assist in more than 100,000 PPP loans totaling more than $5 billion.

That put the small Berks County bank into the top echelons of the nation’s PPP lenders, with the fifth highest number of loans. But at the same time, the loans Customers Bank handled represented the second lowest average loan size. That’s because the bank was helping smaller businesses having difficulty finding help with PPP loans.

“People didn’t understand how this small bank from Berks County could have so many loans up against the big guys,” said Miguel Alban, senior vice president and director of Multicultural Banking.

The answer, according to Michele Vervlied, managing director of Government Guaranteed Lending, was the bank’s partnership with several fintech companies to create an easy-to-use bundle of online services that can help manage the PPP application process through origination, servicing and forgiveness.

The service was able to help Customers Bank simplify the process for smaller businesses – especially those in low income areas – who wouldn’t have the same resources as a larger business.

“We helped everyone, whether they were customers or not,” said Alban. “We put an emphasis on helping the underserved and minority businesses.”

Those small business owners were in many cases left out in the cold because they didn’t have a relationship with a bank that could assist them with the Small Business Administration-backed loans, he said. Banks were too busy with existing customers and many of the business owners were unsure how to proceed.

“The larger businesses already have the banking relationship and it’s easier for them to provide information,” said Vervlied. “This digital process really helped with the first round of PPP.

But even with all of Customers Bank’s best efforts, they can only get to so many small businesses. Alban was tasked with reaching out to other institutions that serve small and minority-owned businesses to get the word out about their system, offering it as a White Label turnkey solution that banks, community development Lenders or even chambers of commerce could offer those they serve.

With President Joe Biden recently announcing  a $1.9 trillion relief package, which, if passed, would offer a “second draw” of PPP funds, Vervlied said the bank is hoping more lenders get on board to offer the simplified process to smaller businesses.

“We’re already reaching a broad range of businesses that we were not able to reach through the first round of loans,” Vervlied said.

So far, Alban said, 25 organizations have signed on to use the program including a $50 billion bank, a top-5 bank and several chambers of commerce, including Long Island African American Chamber, Pittsburgh Metropolitan Area Hispanic Chamber and the Black Delaware Chamber.  These relationships allow those seeking loans to apply through the website of an organization they know and trust rather than a bank they don’t know, he said.

With these partners, some of which are co-branded with Customers Bank, and some of which are being created under the organizations’ names and accessed through their websites, Customers has been able to reach small businesses in parts of the country it normally would never had been able to help.

“We only have enough resources to reach out to so many small businesses,” Alban said.

With these other partners, who know the people behind the businesses they serve, Customers can have connections to something like a small start-up in Chicago that needs help obtaining PPP funds that the bank otherwise wouldn’t have known about.

While Customers Bank does receive fees from the SBA for handling the loans, Alban said it is a relatively small amount compared to the amount of work that goes into handling a PPP loan from start to finish.

The program it is using cuts down on the work and makes the process easier and more efficient for everyone. But, he said, it also isn’t all about making money off loans.

“We want to do this because it’s the right thing to do even if it’s not really making us a lot of money,” Alban said.

It’s part of Customer’s Banks mission to service underbanked minority populations that often are wary of handing their money or financial information over to banks, he said.

“We serve the minority communities. We speak what they speak. We look like they look,” he said. “Minorities will become the majority someday and if we don’t do the right thing for the right reason we’re going to miss that boat.”

By investing time and resources into those small businesses now, the bank hopes they will remember who helped them stay with Customers Bank when they become successful, growing the bank’s business organically.

Using fintech to help small businesses get their share of the federal assistance is one step in that direction.

PPP loan applications open today with a tighter focus on small business

Lenders with less than $1 billion in assets can now submit applications for the second round of the Paycheck Protection Program (PPP) starting today, but borrowers looking to use the program a second time will have more hoops to jump through than they did last year.

The newest rollout of the program by the U.S. Small Business Administration is nearly identical for first time PPP borrowers, but businesses looking to draw from the program a second time, will face a number of changes to ensure funds go to more small businesses.

The program, which gives eligible businesses a low-interest private loan to go to payroll and other costs, is funded through the $284 billion, bipartisan coronavirus relief bill signed into law last month.

During the first round of PPP loans, borrowers were given 2.5 times their average payroll costs with a max loan amount of $10 million. Anyone who has yet to apply for a loan through the program will still be eligible for that amount, but businesses drawing for a second time be limited to $2 million.

Borrowers in the restaurant and hospitality industries drawing from the program a second time have the opportunity to draw more from the program at 3.5 times their monthly payroll.

Businesses seeking a second PPP loan must have 300 or fewer employees, demonstrate a drop in revenue from one calendar quarter compared to the same quarter the previous year, and show they used all of their first-round money.

Ryan Hurst, a partner at CPA accounting and business consulting firm RKL, said that the majority of questions he is fielding concern the the added steps for second-time borrowers. The new round is designed to have a stronger emphasis on smaller businesses.

“Previously there was no real quantitative test to this,” he said. “This time, they say if you want a second loan, there needs to be a quantitative test because you can show performance and see if it declined or not. The attempt is to get more money into the hands of those that need it.”

While there may be more hurdles for borrowers seeking a loan, the administration has also made a number of changes this time around to give borrowers more freedom on how they spend the money. Previously PPP could only be used for payroll, rent, mortgage and utilities. The new law includes operations expenditures, supplier costs, worker protection expenditures and property damage costs.

Borrowers drawing for either their first or second time will qualify for full loan forgiveness if, during an eight-to-24-week period, employee and compensation levels are maintained, the proceeds are spent on eligible expenses and at least 60% of those proceeds are spent on payroll costs.

For businesses borrowing under $150,000, Hurst said it should be a relatively easy process to receive loan forgiveness.

“For a forgiveness application coming for loans under $150,000, that is supposed to be a simple one-page application for those borrowers,” he said. “If someone has a loan of $140,000, they can certify a number of things and say we used all the money and followed the rules and they can go on their way a lot more easily than someone with a larger loan.”

Harrisburg-based Centric Bank opened its loan portal for businesses to get a head start on their PPP loan applications earlier this week. Patricia Husic, president and CEO of Centric Bank, said that the bank has a much more automated loan portal this year, which should take the heavy lifting away from small businesses and make the processing of those loans much quicker.

“For some last year I heard it took them six to eight weeks to get their funds,” Husic said. “How do we turn it quickly and get it into their hands? Those are the key areas where I feel like we are in a better position.”

The SBA plans to reopen the PPP program to lenders of all sizes on Tuesday.

Paycheck protection loans of $50,000 or less fully forgiven regardless of employee retention

Borrowers who received loans of $50,000 or less from the Paycheck Protection Program will now be forgiven for the full loan amount regardless of any decreases to their full-time employee count or wages.

That’s according to the latest guideline update from the Small Business Administration. The new streamlined application process for borrowers of smaller loans settles concerns of many employers of losing forgiveness eligibility for unsuccessfully using the funds to bring back full-time employees to pre-pandemic levels.

SBA officials began approving PPP forgiveness applications and remitting forgiveness payments to PPP lenders for their borrowers on Oct. 2, almost two months after the system for forgiveness applications opened in August. To streamline the process for small business borrowers whose loan was $50,000 or less — 76% of Pennsylvania borrowers and 68% of borrowers overall — the SBA issued a simpler forgiveness application for that class of borrowers.

“It’s a win for those class of borrowers because it makes their lives a lot simpler,” said Ryan Hurst, a partner with the business consulting services group of Lancaster-based RKL. “It certainly helps the borrowers in terms of the amount of info they need to prepare. But it’s more for the lenders and the SBA itself, with less for them to review.”

PPP funds were a lifeline for many small businesses who applied through their lenders beginning in April to cover payroll costs, pay certain overhead expenses and retain full-time employees during the pandemic. The program has provided 5.2 million loans worth $525 billion to small businesses, which the SBA said supported more than 51 million jobs.

The SBA stopped accepting PPP loan applications on Aug. 8.

Guidelines for the PPP loan program have undergone significant revision since it was signed into law at the end of March as part of the CARES Act. Initially the program included an incentive for small business owners to re-hire and retain their full-time workforce by reducing the amount of a PPP loan that can be forgiven in proportion to the decrease in full-time equivalent employees or in wage and salary.

The SBA and Treasury Department said the latest rule “strikes an appropriate balance between the need for simplification in the forgiveness process with the responsibility to protect the integrity of the program and safeguard taxpayer funds.”

“Today’s action streamlines the forgiveness process for PPP borrowers with loans of $50,000 or less and thousands of PPP lenders who worked around the clock to process loans quickly,” said Treasury Secretary Steven Mnuchin. “We are committed to making the PPP forgiveness process as simple as possible while also protecting against fraud and misuse of funds. We continue to favor additional legislation to further simplify the forgiveness process.”

Bankruptcy filings are down over last year, but a wave is expected if the lockdown continues

Businesses and individuals considering bankruptcy during the pandemic might be holding off for now while the crisis unfolds, but experts expect bankruptcies to rise as companies continue to struggle.

“Many industries are under extreme stress, especially those dealing with hospitality, retail, various types of service businesses, manufacturing, commercial real estate, and transportation,” said Brian W. Bisignani, principal with Post & Schell, P.C., based in Lancaster County. “It is not just big companies or small companies, and it is not simply one geographic region, but a broad cross section of companies and throughout the country.”

For now, though, statistics from the U.S. District Court, Middle District of Pennsylvania, show that bankruptcy filings for the second quarter of this year are lower than the same quarter a year ago. For the three-month period ending on June 30, which was during the height of the pandemic, 817 new bankruptcies were filed. The three main bankruptcy chapters are Chapter 7, which is a liquidation, Chapter 11, which allows for a restructuring, and Chapter 13, which gives individuals the opportunity to create a repayment plan with creditors.

The 817 filings for the Middle District, which spans from southcentral Pennsylvania through the Lehigh Valley, included 625 Chapter 7 filings and 192 for Chapter 13, with no filings under Chapter 11. 

In comparison, for the same period in 2019, there were 1,526 filings. Those included 953 filings for Chapter 7, 11 for Chapter 11, and 559 for Chapter 13, with three listed as “other,” according to court records. 

Sara A. Austin, with the Austin Law Firm based in York, said that businesses are now just starting to think about filing, and a lot of those cases will be in the retail sector.

“This area will start to pick up as the lockdowns continue and people shop less and buy less,” Austin said. 

“As for personal filings, that has not even begun yet,” she added. “For many, they need to figure out how to pay for the roof over their head and food on their table. They are not worried about paying the credit card, medical, personal loan or other unsecured debts they might have, and those are the ones that a bankruptcy will discharge.”

Austin pointed out that entities holding the debt are not filing lawsuits because they know there is no way to collect, which is another reason why there are so few personal filings so far.

“At some point, especially when foreclosures begin again, this tide may turn and people may file to bring mortgages current and to keep houses,” Austin says. 

Observers also suggest that the lower numbers in the second quarter compared to 2019 simply reflect a doldrum that will not last after stimulus money works its way through the economy and businesses and individuals use up savings. 

“During the initial part of the crisis, these companies relied on cash and other reserves, including credit lines from their lenders,” said Bisignani, whose practice exclusively works in the areas of corporate and business bankruptcy cases and financial restructuring. “In fact, a number of companies simply drew down their credit lines and parked the cash.”  

At this point, at least In some instances, reserves are low or exhausted.  

“I would suggest that you will see increased corporate filings throughout the remainder of 2020 and certainly into 2021,” he said, noting the severe contraction in the national gross domestic product since the pandemic started.  “ …  You are seeing the beginning of a wave of corporate and business bankruptcy cases. That trend is going to continue, and in fact, increase.”

Statistics for July and August were not yet available, but other experts expect spikes, as well.

Douglas J. Smillie, chair of the litigation department with Fitzpatrick, Lentz and Bubba in Allentown, said many creditors are in “forbearance mode, whether forced or voluntary.”

“For example, many banks are granting payment moratoriums,” Smillie said. “In other cases, the state has placed a hold on evictions and foreclosures. This means that some of the pressures related to finances, such as foreclosure, eviction and collection lawsuits, have been on hold.”

For a lot of businesses, the mandatory shutdowns have pushed them to the brink, forcing them to consider bankruptcy, he added.

“An interesting issue, particularly related to COVID-19 and the CARES Act, concerns the availability of PPP (Paycheck Protection Program) loans to business debtors,” Smillie said.

The federal Small Business Administration determined that such funds would not be available for companies in bankruptcy, which has led to litigation to compel the SBA to make the loans. 

“The courts have split on the issues, and there have been some creative solutions, including the quick dismissal of a bankruptcy case in order to allow the company to obtain PPP funds, followed by the prompt re-filing of a bankruptcy,” Smillie said.

Expert advice

Bisignani works with creditors, so his advice to business clients is to be careful and to try to work with companies that were healthy before the pandemic but couldn’t avoid the severe distress caused by the crisis. Exerting too much pressure might force the companies into bankruptcy.

“Some of these companies are presently adapting and will successfully adapt to the new situation, while others will not and will have no alternative but to file for bankruptcy protection,” he said. “We are already seeing that happen.”

He also looks at how well a company is run. 

“Those that are well capitalized and well managed by competent professionals will withstand the crisis much more readily than those which are not,” Bisignani said.

He and the others don’t expect a return to normal anytime soon, with Bisignani saying that the future will be different for various businesses.

“Certain industries will take literally years to return to normal,” he said, noting that the airline industry is one example. “Other industries will recover more quickly.  … The real question is when will the pandemic come under better or more effective control — and that is currently unknown. When that happens, things will start to return to normal.”

One of the biggest changes will be in the commercial real estate market, where a lot of lease holders are not paying rent or asking for a partial deferral. Meanwhile, a lot of companies are rethinking whether they need as much space because people continue to work from home.

“All of that is going to impact the value of certain types of commercial real estate,” Bisignani said. “It also means that the office environment as we knew in 2019 and before may never return to what was once normal.”

 Smillie suggested that some businesses still don’t have enough information.

“For many clients, creditors and debtors, we are still in a wait-and-see mode,” he said. “I believe that many businesses that closed may be able to re-open once it is safe to do so. Both creditors and debtors are in the same situation: a shuttered business may not be able to pay rent, but in the current situation, a landlord is unlikely to find a viable replacement tenant. The old adage ‘you can’t get blood from a stone’ holds true.” 

He expects that there will be a number of disputes resolved short of court, unless there are too many debts coming from too many directions, such as vendors, utilities, landlords and lenders.

“Then bankruptcy may be the only option,” Smillie said. “Whether that bankruptcy takes the form of a reorganization or a liquidation will vary from company to company, business to business. “

Electronic operations

Because the federal court system moved to electronic filings years ago, access to the courts has been relatively open, so COVID-19 has not hampered that aspect of bankruptcies. In fact, a note on the website of the Middle District points out that it is proposing a rule change to enhance electronic filings by further promoting electronic signatures, and the rule change could take effect in September.

“My practice before the bankruptcy courts has been impacted, but not horribly,” Bisignani said .

Federal court filings have been done electronically for a number of years, and court hearings have continued through telephonic court appearances, he pointed out. Problems could arise as the number of COVID-19 cases increase and governments impose new restrictions. 

“In March, there was considerable disruption as many firms switched to remote work environments for their personnel,” he said. “However, overall, it has not been as disruptive as one would think given that many firms have invested heavily in technology over the past 10 years or so that makes remote working relatively easy. This would not have been the case 20 years ago when the state of technology was considerably less advanced.”

Overall, he isn’t optimistic about the year ahead. 

“The wreckage that has been created since February 2020 is extreme and unprecedented,” Bisignani said. “I have been a commercial bankruptcy practitioner for over 30 years, and I have never seen anything quite like this. It is across industries. It is not just nationwide, it is worldwide. Supply chains are disrupted. You have massive numbers of unemployed workers or underemployed workers.”

The cascading effect of people not working or working less, so therefore not spending, will continue to ripple through the economy, placing even more stress and layoffs at businesses that are interconnected, he added.

“The economy will come back into equilibrium, but it will take some time and, unfortunately, many people and many businesses will be hurt in the process,” he said. 

But for well capitalized businesses, there are opportunities, he also said. 

“And many more opportunities will arise over the next few years as the financial crisis winnows out the weak companies, those companies without adequate financial reserves, and those companies that cannot adapt,” Bisignani said. “Bankruptcy is designed, in part, to allow for the re-use of assets through bankruptcy sales and other transactions and certain companies will be able to take advantage of that and emerge stronger when this crisis passes.”

Community First Fund doubles PPP loans to mom-and-pops

Initially, Community First Fund was expecting to approve $10 million in Paycheck Protection Program loans to help small businesses stay afloat during the COVID-19 pandemic, said President and CEO Daniel Betancourt.

But the lender – a community development financial institution, or CDFI, headquartered in Lancaster – quickly realized the demand would be enormous. The fund targets historically underserved populations, such as minority and women business owners, and serves 15 counties in southcentral and southeastern Pennsylvania. Betancourt calls Community First Fund “a mission-based bank.”

So the $10 million target became $20 million – and the capital to cover that has already been raised, he said.

President and CEO Daniel Betancourt of Community First Fund PHOTO/SUBMITTED

The money “came just in time for us to replenish our reserves,” Betancourt said.

Community First Fund received low-interest (less than 1%) loans from three sources:
• $5 million from U.S. Bancorp Community Development Corp., the tax credit and community investment subsidiary of U.S. Bank. The fund was among seven CDFIs chosen nationwide.
• $10 million from PNC Financial Services Group. Community First was among eight CDFIs to receive PPP support loans.
• $5 million from the Federal Reserve’s PPP Liquidity Facility.

For the Fed to lend to community development financial institutions is “unprecedented,” Betancourt said.

And the PNC money, he added, was approved within days.

In a press release, Zack Boyers, CEO of for U.S. Bancorp Community Development Corp., said: “CDFIs are committed to supporting entrepreneurs and small businesses in low-income and underserved communities and that means collectively, these CDFIs will help keep paychecks flowing to employees who may need it the most.”

Many of Community First Fund’s clients are “mom and pop” establishments, with less than a quarter of a million dollars in annual sales, Betancourt said. They include barber shops. Salons. Auto mechanics. Restaurants.

The lender disbursed 500 loans out of that $20 million, which comes to an average of $40,000 per loan. The average for African American and Hispanic entrepreneurs was $15,000, he said.

Ninety-five percent of PPP applicants were approved, and the loans were issued within 10 business days, Betancourt said.

Susan Louie, owner of Citronnelle at 110 W. Orange St. in Lancaster — a French restaurant “with a global twist,” as she described it — received $12,400. For the past two months, with the eatery closed, that loan’s been her only source of income, Louie said. The establishment’s seven or so employees including Louie and her husband, Rafael Perez, the chef.

Citronnelle, in business seven years, plans to start offering takeout service next month, and patio dining when it reopens, she said.

The owner of M.A.K. by Judy hair salon, Judy Henriquez, was approved for a loan of more than $5,000. Her business at 402 W. Orange St. in Lancaster has been shuttered since mid-March, she said; the salon employs two stylists in addition to Henriquez.

A couple of friends recommended she apply with Community First Fund. The money has been a big short-term help, she said.

The PPP is part of the CARES Act, an economic stimulus signed into law last month. At least 75 percent of the loan money must be used for payroll, Betancourt said. “They have eight weeks to document they’re doing that.”

If Community First Fund verifies it, the loan is forgiven, he said.

Tyrik Jackson is a repeat client. The owner of Sharper Image Barber Shop at 361 E. Chestnut St. in Lancaster and Premier Barber Institute in Norristown, he received three prior loans from the lender before being approved for $6,400 through PPP. Community First Fund “is an incredible resource,” he said.

The fund also invests in “catalytic” community revitalization projects, Betancourt said. One of those was the Holiday Inn Lancaster, the former Brunswick.

The Holiday Inn received a PPP loan of about $450,000. Sam Wilsker, co-developer of the hotel with John Meeder, said the money helped with payroll for their 75 employees and allowed them to bring back the chef and others who work in The Imperial restaurant, which now offers takeout service.

“We’re doing what we can to hang on,” Wilsker said.

The hotel has some guests, including health care workers, and college students who can’t go home because of the pandemic, he said.

Turning the Brunswick, which was about to be condemned seven years ago, into a high-quality hotel was very challenging, Wilsker said.

It was “a labor of love – and pain” even before the COVID-19 pandemic, he added, and Community First Fund was a major reason it came to fruition.

Herbein + Co. survey shows surprising post COVID-19 business confidence

While much of the discussion on the economy’s post-pandemic future has been negative, a recent flash poll conducted by Herbein + Co. of Wyomissing shows surprising optimism among business leaders in the Mid-Atlantic.

A poll of more than 450 professionals in a wide range of fields showed that 74% were very or somewhat confident about their businesses in the next six month.

“There’s without question some uncertainty,” said David Stonesifer, managing partner at Herbein. “But they believe in their customers. They believe in their workforce and they believe that they will weather the storm.”

He noted that 16% of respondents said they felt neutral and around 10% said they were less confident their organizations would soon prosper.

“I was pleasantly surprised by how few there were,” Stonesifer said.

There was, however, a connecting factor in the relatively positive group. Of those surveyed, 76% said that they had applied for and received Paycheck Protection Program funding through the CARES Act.

“I think this shows that government stimulus programs were vital to recovery,” he said. “In the absence of this, I believe it would have been a significant struggle.”

He noted that the survey was taken before the second round of PPP was released, but the respondents knew more funds were coming, which likely impacted their positivity. Speaking with his own client base, however, Stonesifer acknowledged that many struggled to get the loans, particularly with larger banks.

“Smaller banks seemed to be more nimble and the success rate was greater,” he said.

Stonesifer said his company has been keeping extremely busy helping clients with funding like PPP and he sees the next big challenge as PPP loan forgiveness.

Companies can apply to have the PPP loan forgiven if they can show that it was used for designated expenses, such as employee salaries over the eight weeks from receiving the loan.

He said while there is “absolute confidence and a reliance on getting loan forgiveness,” among his clients, the Small Business Administration’s guidance on loan forgiveness parameters has been somewhat murky.

But, he noted that the SBA did rush to get the money out to where it is needed so his firm expected some confusion over the rules and expects clarifications will be forthcoming as issues arise, and companies will be seeing the funding as the boost they needed.

‘Good-faith’ rehiring efforts forgiven in latest PPP guidance update

Employers can expect to be fully forgiven for their Paycheck Protection Program (PPP) loan if they make a “good-faith” effort to bring back laid-off employees onto their payrolls — even if an employee declines their offer. That’s according to the most recent guidance update from the Small Business Administration (SBA), the federal agency responsible for overseeing the PPP.

Congress allocated $659 billion to the SBA’s PPP fund — $349 billion for the first round and $310 billion for the second — for business owners to bring back laid-off, full-time workers whether or not the business is permitted to resume in-person operations. Employers who retain their full-time equivalent workforce counts with at least 75% of the loan amount can have the loan fully-forgiven by the SBA, according to guidelines.

But since PPP loan amounts are calculated as 2.5 times a company’s monthly payroll costs, what happens when a worker declines the offer to go back on the payroll?

The agency’s guidance for appropriate use of PPP loan money previously held that business owners must call back their laid-off employees and restore their payroll to pre-pandemic levels or suffer a decline in forgiveness. Unforgiven loan amounts would have had to be paid back at a 1% rate over 24 months.

As of May 3, employers would not lose their forgiveness if an FTE employee declines to go back on their payroll as long as the employer makes a “good-faith” written offer to rehire that employee, according to the latest SBA guidance update. If the employee refuses the offer, the SBA stipulates that rejection of the offer be documented by the borrower to be forgiven for the expenses associated with that FTE worker.

Retaining full-time equivalent (FTE) employee counts is a common concern for small business owners in the midstate hoping to optimize their PPP loan funds, said Ryan Hurst, a partner with Lancaster-based RKL’s business consulting services practice. RKL recently formed a team dedicated to helping businesses navigate PPP loan forgiveness.

“I do think this is a step in the right direction,” Hurst said in reference to the SBA’s recent guidance update. “A genuine concern of employers is ‘what if my employees don’t come back? I’m not going to be penalized for someone who chose not to come back when I did everything I could possibly do to bring them back.’”

Tom Jordan, Lancaster Market president for Univest Bank, one of many Pennsylvania lenders handling PPP loans, said a challenge many employers have faced is incentivizing employees to return to their payroll when the government’s unemployment benefits system could offer more money to do nothing. The $3 trillion CARES Act provides unemployment insurance filers $600 a week on top of payouts from individual state programs.

“If you’re one of those employers, you’ve got to contemplate, do I take this PPP loan? The only way I can get forgiveness is if I put it to payroll, but now I got to get my team to go back to work for less money and, if I’m not open, I really don’t have anything for them to do,” Jordan said. “In theory, it’s an awesome idea, but in practical terms, it’s very difficult for some folks.”

Employees who decline the offer to be rehired could be forced to forfeit their eligibility for unemployment compensation from state programs, according to the most recent SBA guidelines and officials from the Pennsylvania Department of Labor and Industry.

Since the April 3 launch, the PPP has been defined by day-to-day, post-hoc guideline updates, as policymakers rush to provide billions in relief funds for imperiled businesses struggling during the coronavirus-caused recession.

Donna Partin, owner and operator of a Merry Maids franchise in the midstate and a PPP loan recipient, said the most recent SBA guidance update takes away some of the stress small business owners face in the midst of the COVID-19 pandemic.

“It relieves some of the pressure to fill that FTE spot and makes the guidelines more reasonable,” Partin said in an interview Tuesday afternoon. “Because of the government and because of taxpayer generosity, this loan allows me to open my business carefully and safely. I’m grateful to the loan program because of that.”

Three loan opportunities that could help small businesses survive COVID-19

Financial experts agree that an economic rebound from the COVID-19-induced recession won’t happen until public health officials lift social distancing orders and allow companies to resume business operations.

Until then, federal officials are working with local lenders to help small businesses pay the bills and keep workers on furloughed status — a kind of induced economic freeze — so they are positioned to make a successful economic rebound on the other side of the COVID-19 pandemic.

“Preserving the flows of credit and capital in our economy – to businesses and individuals alike — will help us better fight COVID-19, as well as speed and strengthen our recovery,” said Securities and Exchange Commission Chairman Jay Clayton, in a statement issued earlier in March.

Here are some of the loan opportunities small businesses can use to access funding during the COVID-19 event.

Paycheck Protection Program (PPP)

  • Fixed interest rate: 1%

Available through June 30, the Paycheck Protection Program allocates $350 billion, some 15% of the overall CARES Act package, in federally-backed loans for businesses to stay afloat and keep employees on their payroll while the economy recovers from the coronavirus pandemic.

Employers can apply with any lender certified with the Small Business Administration. Sole proprietors and independent contractors are required to wait until April 10 to apply with SBA-certified lenders, according to SBA guidelines. The latest SBA guidelines say minimum loan amounts are equal to two-and-a-half times a company’s monthly payroll expenses, capping off at $10 million. All payments are deferred for six months.

“These loans will bring immediate economic relief and eight weeks of financial certainty to millions of small businesses and their employees,” said SBA Administrator Jovita Carranza in a statement. “We urge every struggling small business to take advantage of this unprecedented federal resource – their viability is critically important to their employees, their community and the country.”

Carranza said the administration will forgive all loans if employees are kept on the payroll for eight weeks following the date of the loan and the money is used for payroll, payroll tax expenses, rent, mortgage interest or utility payments. SBA guidelines dictate at least 75% of the forgiven amount be used for payroll expenses.

Forgiveness is based on the employer maintaining or quickly rehiring recently furloughed employees and maintaining salary levels, SBA guidelines say. The latest guidelines say forgiveness will be reduced if full-time headcount declines or if salaries and wages decrease. Employee compensation in excess of $100,000 in annual salary is not eligible for forgiveness, but that doesn’t include non-cash benefits.

Employers can apply through any certified SBA-certified lender. Non-SBA-certified lenders can apply to enter the PPP system via the SBA’s online portal.

Lenders are expected to perform a good-faith review of a borrower’s calculations in their application, said Patti Husic, president and CEO of Centric Bank, one of the many SBA-certified lenders facilitating the program in central Pennsylvania.

Economic Injury Disaster Loans (EIDL)

  • Interest rate for businesses: 3.75%
  • Interest rate for nonprofits: 2.75%
  • Loan term: up to 30 years.

The Economic Injury Disaster Loan program provides small businesses with working capital loans of up to $2 million for providing “vital economic support to small businesses to help overcome the temporary loss of revenue,” according to SBA guidelines. Loans can be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid due to the disaster’s impact.

The agency normally reserves these types of loans for specific geographic areas under emergency declarations. But with nationwide emergency declarations due to the COVID-19 pandemic, administrators have made EIDL loans available across all 50 states and U.S. territories.

In contrast to the Paycheck Protection Program loan program, which is facilitated by local financial institutions, businesses can apply directly to the SBA for EIDL funds on the administration’s website portal.

Small business owners experiencing a temporary loss in revenue due to the pandemic are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000. Loan advances, which will be made available following a successful application with the SBA, do not need to be repaid.

EIDL advance funds will be made available “within days” of a successful application, according to the latest SBA guidelines.

Express Bridge Loan (EBL) Pilot Program

  • Loan term: up to 7 years.
  • Interest: up to 6.5% over prime rate, regardless of maturity.

Small businesses with a pre-existing business relationship with an SBA Express Lender can access up to $25,000 quickly via the Express Bridge Loan Pilot Program, SBA guidelines say. Loans are intended to help sustain businesses in the interim between when their EIDL loan is submitted, approved and disbursed.

Companies can apply for emergency bridge loans through certified SBA express lenders. Certified lenders are required to document that the EBL applicant had an operating business as of March 13, 2020, and has demonstrated the business was adversely impacted by the COVID-19 emergency.

Emergency bridge loans are normally made for up to six months after the date of the Presidential Disaster Declaration, but SBA officials expanded the program’s eligibility through March 13, 2021.

Although EBL loans won’t count toward the maximum limitation of the amount of express loans that can be outstanding to any borrower, SBA guidelines say an EBL loan will count toward the maximum amount of SBA loans that can be outstanding to any borrower.

In contrast to Paycheck Protection Program loans, credit scores can be taken into account by lenders deciding whether or not to approve an express loan. The minimum FICO Small Business Scoring Service (SBSS) Score acceptable for the EBL program is 130.