Compared to the first go-around last spring and summer, the Paycheck Protection Program seems to be functioning more smoothly since the application window reopened Jan. 11.
Yet there still are challenges presented to some borrowers and lenders. The Small Business Administration continues to work through some of these issues where it can by fixing systems and issuing guidance, but imperfections remain.
For some small business operators, like John Bikis, owner of Canton-based Royal Docks Brewing Co., grievances today largely stem from what feels like a slow pace for forgiving original PPP loans and securing funds from a second draw.
To be fair, like many in this boat, Bikis acknowledges the massive undertaking that is the PPP and the crush of applications that lenders like his — Huntington Bank — are slogging through.
"It's really not much to do with them," he said. "It's just a process, and the overload of applications is bogging down the system."
But that doesn't necessarily ease anxieties.
"It's hurry up and wait," Bikis said. "And that's frustrating."
The SBA has indicated that a first-draw loan being under review could slow down processing of a second draw.
"The SBA remains focused on delivering first-draw and second-draw PPP loans as well as processing forgiveness decisions for PPP borrowers as quickly as possible," an SBA spokesperson said. "Due to additional front-end compliance checks, a time lapse is occurring between when a lender submits a first-draw or second-draw PPP loan application to the SBA and when the SBA provides a loan number back to the lender. Lenders may only proceed to close the loan once the loan number is given."
Huntington didn't comment about a specific loan like the craft brewery's, but a spokesperson noted the bank has received thousands of applications the "team is moving quickly and diligently to process."
Bikis' business — named one of the fastest-growing craft breweries in America a few years back — pulled in about 35% of revenue that was projected pre-pandemic for 2020.
A $142,000 PPP loan last year helped him continue paying nearly 60 employees through a downturn in customer traffic. But forgiveness of that loan remains a work in progress. And it took a week for Huntington to provide a status update on his second-draw loan, which notes simply the application is "in-process."
That's a bit unsettling for someone seeking relief. Bikis has been making ends meet for months now by drawing on private savings and "rubbing pennies found in the couch" to make it to February, he said.
Last year, borrowers with their paperwork in order typically progressed from filing an application to receiving funding in a week or less.
It's not that Bikis doesn't expect to receive the loan. Not knowing when it's coming, though, creates anxiety.
For some, the forgiveness process is proving to be a racket of its own.
Angela Dudziak, general manager of Neff Brothers RV in Lorain, called the PPP a "blessing." The business received an $89,000 PPP loan last year through a community development corporation (CDC) and has applied for a second draw.
But Dudziak has been working through forgiveness since November, having to reapply at least once because of a change in portals and having to submit additional information a couple of other times. The business, which has nine employees, subcontracts with an outside accountant, who, of course, needs to be compensated.
"It's just a long laundry list of stuff (the SBA is) asking for, and I had to ask our accountant for help," she said. "It is all a bit frustrating."
"But I think everyone is doing the best they can," she added.
Through Jan. 24, the SBA said it has approved 400,580 PPP loans, totaling $35 billion, in 2021.
Of that, 10,336 PPP loans have been approved for Ohio businesses, totaling $1 billion.
Some community banks and smaller lenders have had to improve their technological capabilities to service PPP loans. That includes First Federal Lakewood, which is partnering with fintech platforms Numerated and ProBank Austin to assist with processing applications on the front end and forgiveness on the back end, respectively.
The mutual bank prides itself on being a size at which it has the resources to service PPP demand but is still small enough to talk with customers directly.
Indeed, larger commercial banks have the scale to manage high demand and a large volume of applications, but they tend to move more slowly than their smaller counterparts, which have less volume to process.
Many banks, including Huntington and Cleveland's KeyBank, reported strong fourth-quarter earnings that greatly benefited from PPP fee income. But those without that scale or resources are sitting out PPP 2.0 as direct lenders and missing that upside.
That includes longtime SBA lender Growth Capital Corp. The Cleveland CDC, a nonprofit, still operates like a small business, said president John Kropf, and it can't afford to participate in the labor-intensive process. The organization is having ACAP + Loan Source act as its PPP provider for borrowers seeking second draws and for processing forgiveness applications on 2020 loans.
Youngstown CDC Valley Economic Development Partners also did not have access to affordable capital to lend again at first last year, said Terrence Louk, director of SBA lending. The organization initially opted not to participate in the PPP because of the risk. But then the Treasury opened up to allow it to borrow at a rate in line with which it could lend, enabling Valley Partners to start processing loans in the summer.
Growth Capital, however, took out a $25 million warehouse line of credit in 2020 to fund PPP loans, providing about 300, totaling $17 million — and this was before the Treasury stepped up to help. Some loans were as small as $1,200.
Initially, the SBA program was supposed to be applicable only for expenses in an eight-week period, but that time frame was extended through the end of 2020.
While this helped borrowers, it contributes to expenses for Growth Capital, which found itself waiting much longer to file forgiveness applications. Lenders collect fees on the back end, so that extra time leads to extra expense in Kropf's case.
"I'm still paying interest on the warehouse line, and I only made 5%," he said. "Now my margins are shrinking, expenses are increasing and it's just not working. We can't participate in the second round as a direct lender because of that. It is just too expensive. And we won't do anything we can't at least break even on."
Community development financial institutions (CDFIs) and CDCs that were supposed to get a week head start on filing applications in January over other lenders did end up hitting snags that slowed down the funding of loans. The Opportunity Finance Network, a national trade group representing CDFIs, argued a better rollout would have allowed for more loans to get to small businesses that really need them, including marginalized groups those agencies tend to serve.
In a letter to the SBA, OFN president and CEO Lisa Mensah lobbied for some changes to ensure timely funding for borrowers, including a dedicated time frame for CDFIs to access loan portals, updates on PPP set-asides for nonprofit and mission lenders to know how much is left for target communities, better communications from the SBA, and improved technical assistance.
"and" - Google News
January 31, 2021 at 04:00PM
https://ift.tt/3j1b3ar
PPP 2.0 still has some imperfections for borrowers and lenders - Crain's Cleveland Business
"and" - Google News
https://ift.tt/35sHtDV
https://ift.tt/2ycZSIP
And
Bagikan Berita Ini
0 Response to "PPP 2.0 still has some imperfections for borrowers and lenders - Crain's Cleveland Business"
Post a Comment