Neffs National Bank honored for PPP loan work

Neffs National Bank’s Michail Georgevic, commercial loan portfolio manager; Greta Mast, vice president of commercial lending; and Marianne Eisenhauer, vice president of commercial lending & credit administration at the Pennsylvania Association of Community Banker’s Inspire Awards. PHOTO/SUBMITTED –

When the COVID-19 pandemic started, Neffs National Bank wasn’t an active Small Business Administration lender.

But, after a short learning curve that quickly changed and now the bank has been honored for its work in helping people obtain SBA Payroll Protection Program (PPP) loans by the Pennsylvania Association of Community Bankers.

The bank received the organization’s Inspire Award for coming to the aid of the small businesses it serves in the community.

Marianne Eisenhauer, vice president of commercial lending & credit administration for Neffs, said the bank is proud of the way it was able to help so many small businesses, and gain customers in the process.

“Our phones were ringing off the hook with current customers asking us to help them with the PPP,” she  said.

The problem was that bank’s staff wasn’t familiar with the SBA lending process used for the forgivable loans. “It was challenging because we had to learn the process,” she said. “We had to find a way to get up and running and provide those loans to our customers.”

Once they were able to figure the process out, the bank’s lenders worked directly with small-business owners to help them to obtain the loans and make it an easier process.

She said many of the bigger banks weren’t offering such hands on service, so some of their current customers recommended Neffs to other business owners to get the help they needed. Because the bank was working directly with the SBA and not a third party vendor, they were able to get the money to their customers quickly.

“It was a lot of work, but in the end we got a lot of new customers because of it,” Eisenhauer said.

In all, Neffs helped obtain 370 loans for community businesses to help them maintain payroll and stay in business during the shutdown. One of those companies was a community pharmacy that used its PPP loan to keep its employees on payroll and a few months later were providing COVID vaccines in community.

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.

New federal stimulus package welcomed, lawmakers point out issues

State lawmakers praised the coming of the $900 billion federal stimulus package approved by the Senate and Congress this week but noted that much more must be done before the nation recovers from its public health and economic crisis.

The fourth major spending legislation targeting Americans in the midst of the COVID-19 pandemic is awaiting President Trump’s signature after being approved by both the House and Senate on early Monday morning.

The legislation, which includes a new round of $600 stimulus checks, a $300 extension to unemployment benefits and a second round of access to the Paycheck Protection Program (PPP), was long overdue, Gov. Tom Wolf said in a statement on Tuesday.

“The emergency relief funds authorized under the CARES Act were crucial to helping our nation survive the spring surge of COVID-19, but those funds expired while desperate need remained,” said Wolf. “Americans continue to struggle due to the economic consequences of this global pandemic.”

The second round of forgivable PPP loans will provide 2.5 times the monthly payroll costs for businesses from a $284 billion federal pool. Businesses will also be able to deduct expenses paid with PPP loans.

Tom Bené, president & CEO of the Harrisburg-based National Restaurant Association, said that Congress’ action will keep tens of thousands of restaurants from closing for good.
“A second round of PPP, combined with unique enhancements for the restaurant sector, will provide critical access to capital,” said Bené. Restaurant operators and their employees are dedicated to serving their communities, and today’s bipartisan agreement will give them the opportunity to do that through the holidays.”

Both U.S Senators Bob Casey (D-PA) and Pat Toomey (R-PA) issued statements noting that they were relieved to see additional aid released to Pennsylvania, but saw flaws in the legislation.

“While there is much in this bill that I disagree with, including wasteful government spending and misguided policies that will dampen the recovery, the good it does outweighs the bad,” said Toomey.

He added that he was glad to see Congress extend unemployment eligibility for the self-employed and gig workers, reauthorize PPP for small businesses, pick up the cost of distribution and administration of the COVID-19 vaccine and provide assistance for education.

Casey wrote in a statement that the relief bill does not include critically-needed money for state and local governments to prevent service cuts and layoffs for firefighters, law enforcement and local health departments.

“It also lacks meaningful policies and investments to protect nursing home residents and workers and to allow seniors and people with disabilities to receive needed care at home,” he said.

Federal officials evaluating ‘good faith’ of high-value PPP loan borrowers with new form

Borrowers of the federal Paycheck Protection Program who took loans of $2 million or greater can expect to receive a form from lenders on which they will be required to attest their funds were necessary to sustain the operations of their business during the pandemic, according to an update from the Small Business Administration in early November.

Launched in early April and concluded in August, the Paycheck Protection Program (PPP), established under the CARES Act, provided loans for businesses to retain employees and pay for certain overhead costs. In its current form, the program allows borrowers to be fully forgiven if they use at least 60% of the loan on payroll expenses.

The PPP has provided 5.2 million loans worth a total of $525 billion to businesses and sustained more than 51 million U.S. jobs, according to a statement released by Treasury Secretary Steven Mnuchin in October.

SBA loan reviewers will use questionnaires — distributed to lenders to be given to borrowers in the coming days — to collect “supplemental information” to evaluate the good-faith certification that borrowers made on their PPP Borrower Application, according to the forms, which have been reviewed by Lehigh Valley Business.

Information solicited by the forms includes the borrower’s gross revenue in the second quarter of 2020 compared to previous quarters and details of how borrowers altered their operations since President Trump’s March 13 disaster declaration.

The SBA is requiring separate questionnaires of for-profit and nonprofit employers — Form 3509 versus Form 3510 — with the questionnaire for nonprofits requesting information related to endowment income and specific nonprofit entities like education and health facilities. The forms state that they must be completed and returned to the lender servicing the PPP loan within 10 days of receiving it from the lender.

The reason SBA reviewers will give special scrutiny to loans of $2 million or greater is to “maximize program integrity and protect taxpayer resources,” according to the forms.

“The information collected will be used to inform SBA’s review of your good-faith certification that economic uncertainty made your loan request necessary to support your ongoing operations,” the forms state. “Receipt of this form does not mean that SBA is challenging that certification. After this form is submitted, SBA may request additional information, if necessary, to complete the review. SBA’s determination will be based on the totality of your circumstances.”

Failure to complete the questionnaire could result in the SBA’s determination that the borrower was ineligible for either the PPP loan or any forgiveness amount claimed, forms state.

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.”

Carbon County has $5.8M in PPP grants for small business, nonprofit and others that ‘fell through the cracks’

About $5.79 million in Covid-19 Relief (Carbon) County Block Grant money up for grabs in Carbon County.

Distributed through the Pennsylvania Department of Economic and Community Development grants are open to small businesses, certain nonprofits and municipal organizations, many of whom “fell through the cracks” of previous federal CARES Act stimulus finding.

Pennsylvania received $625 million to make available to its 62 counties through the CARES Act.

“The funding is to help small businesses pay for pandemic related costs” to prepare, prevent and respond to coronavirus, said Kathy Henderson, director of economic development at Carbon Chamber and Economic Development Corporation in Lehighton.

The focus of the county grants is to help shore up funding for those who missed out on Paycheck Protection Program or Economic Injury Disaster Loan program benefits, Henderson said.

Grant applications are open until July 31. Funding is not expected to release until late September, and the size of grants has not been determined, officials said.

Carbon County Commissioner Chris Lukasevitch said grant amounts would be determined upon demand, determined through vetting applications received through the process.

“Based upon the amounts [received and requested], we’ll be able to do 100 percent or some proportion,” he said.

Applications will be vetted through committees based upon companies with less than 100 employees and must meet criteria for assistance.

Those eligible to apply include municipal governments, nonprofit assistance programs, behavioral health services and broadband service improvements or implementation in underserved areas of the county.

Henderson said the grants aim to offset costs needed to reopen or make accommodations to continue doing business during the pandemic such as paying for PPE, installing or adding safety and protective barriers, additional disinfection supplies or professional cleaning services.

“The grants [may also] pay for pandemic related costs such as tents [or canopies] for moving business outdoors,” Henderson said.

Michelle Keil opened her new business, Uncommon Grounds at the Mill in Weissport in February. Six weeks later, she was forced to shut her new business down.

After quitting her full time job to open the brick and mortar Uncommon Grounds at the Mill “knowing it takes a while to get up to full speed, we closed the doors on March 19, and those [mobile café] events got cancelled, too,” She said.

“We already had an entire year booked for the trailer. One after one the events for the trailer got cancelled,” she said.

Keil said because the Uncommon Grounds Mobile Café had been operating on a part-time weekend basis and was serving and events as coffee house on wheels, she hit roadblocks for PPP and EIDL funding after coronavirus shut businesses down.

Though she was unsuccessful in obtaining money through the Paycheck Protection Program – her business would only qualify for one week of employee salary benefit, she received a small EIDL grant as well as a $1,000 grant from Carbon County.

“We’re a unique situation because we’re new, but we’re not new. We expected to get PPP to pay ourselves, some employees and keep operating, but that didn’t happen,” Keil said.
She hopes this round of county grant money will be different.

“The Carbon County grant, if we get it, will allow us to bring on more staff to support creative opportunities we’re exploring,” Keil said.

Keil is not open full time yet, and she has set up at the Lehighton downtown outdoor farmers market, and is exploring others.
According to the Pennsylvania Department of Economic and Community Development website, the Community Development Block Grant conditions have been revised to provide relief through the CARES Act to organizations impacted by coronavirus through financial grants and technical assistance.

The provision allows business and municipalities to apply to offset money they spend to “prevent, prepare for and respond to the coronavirus,” the Pennsylvania state website said.

Carbon County Commissioner Chris Lukasevitch said 501 C 3 and 501-(19) organizations such as U.S. Armed Forces posts or auxiliary organizations, would be eligible to apply for grants through the county’s offering.

“We will prioritize those who did not receive PPP or EIDL loans,” Lukasevitch said.
He expects demand will be a factor in driving grant award amounts. “We don’t have any numbers yet” for individual grants, Lukasevitch said.

The Pennsylvania website said expenses must be dated from March 1 through December 30, 2020 to be eligible.

Signed into law March 27, 2020 the CARES Act was an historic economic package worth more than $2 trillion.

The small business grants open to business owners like Keil, will help offset expenditures to reopen and recoup some of the money they’ve spent “just to survive this.”

Keil is grateful to Carbon County officials and agencies for supporting her fledgling business during the pandemic.

“A whole team of people by my side, sending me grant applications and different funding sources. “There have been a ton of silver linings, which is what has kept us going,” she said.

Fulton Bank handles $900 million in PPP loans

Approximately 4,000 Fulton Financial Corporation customers across Pennsylvania received more than $900 million in funding through federal CARES Act Paycheck Protection Program, including hard-hit nonprofit organizations whose mission is to serve others.

“When we got the PPP it allowed us to hire the entire staff back [and restore] critical programs serving the community,” said David Fagerstrom, president and CEO of the Greater Valley YMCA in Allentown.

Throughout its service area more than 10,000 loans worth nearly $2 billion have been facilitated by Fulton, officials said.

The CARES Act, or Coronavirus Aid, Relief and Economic Security Act, signed into law on March 27, aimed to offset financial hardship due to business and organization closures and the resulting income loss due to the pandemic.

Greater Valley YMCA provides meals to children of who receive National School Lunch Program free and reduced lunch services.

“Some schools were serving lunches, but no one was serving suppers,” Fagerstrom said.

It offers virtual educational programs for children and it operates essential worker day-care services. The “Here for You” child care program for health care and emergency responders was offered through the Y operating with a special exception waiver during the coronavirus peak. Before the mandatory governor’s shutdown order, Greater Valley employed about 493 people.

Before receiving PPP funding, employment numbers sank below 50 during drastic measures taken to ensure the Y would not close for good.

“With all the Y’s closing – child care and membership services – [these] combined are about 80 percent of our business,” Fagerstrom said. “When the physical plants closed our income went down to almost zero.”

Once PPP funding was received Greater Valley YMCA rehired its entire staff, brought back needed services, provided meals and increased virtual education offerings to children.

“You always hope your business relationships are less clinical and more personal – it certainly felt more personal with this,” he said.

An established long-time relationship with Fulton, along with the bank’s expertise in working with nonprofit organizations created a quick, seamless application process from lender to Greater Valley YMCA, Fagerstrom said.

Not long after filing its PPP application Fagerstrom received a phone call from Fulton with news that the Y had received funding.

“In our wildest dreams I would not expect our guy at our bank [to] call us at 5:40 p.m. on a Friday. That call was a little thing, but it made a big difference to the Y. It was a relief for [our] people,” Fagerstrom said.

Building from the ground up

PPP allowed Greater Valley to expand virtual educational programs to offset the shortened academic school year, especially critical for youngsters who need extra support ahead of entering kindergarten in the fall.

“When all the staff came back one of the things we quickly did …was Webex classes with the 2, 3 and 4-year-olds to keep them learning, reading and on track with their ABCs,” he said.

Joseph Feilmeier, market president for Fulton Bank’s City Line Plaza in Bethlehem, said the response of Fulton’s team to the CARES Act helped area nonprofits continue to operate and minimize the long-term impact on the region’s economy.

“Our mission [was] to build a process from the ground up in a very short period of time to serve our clients. It was really all hands on deck,” he said.

More than 600 Fulton employees took on new assignments doing work that was outside their normal responsibilities to help “stand up a program where there wasn’t one,” Feilmeier said.

“For the not-for-profit piece, we encouraged our employees to reach out and find the underserved organizations we could help and support, Feilmeier said.

Boosting nonprofits

Jared Mast, executive director of Greater Easton Development Partnership said Fulton worked “around the clock” with other community lending organizations to help area nonprofits and businesses financially weather the pandemic. A Fulton staff member contacted him on a Saturday to confirm information on the PPP application to keep it moving.

“Without [the PPP] it would have limited our ability to keep on staff. Essentially they were staying as close to the front lines of this as possible,” Mast said.

GEDP oversees the Easton Farmers Market, the Easton Public Market, PA Bacon Fest and other fundraising programs as well as Easton Main Street Initiative and Easton Ambassadors.

“When this started to change the way business could be transacted [we arranged for] curbside pickup for folks who wanted to shop at the [Easton Public] Market,” Mast explained.

GEDP collaborates with businesses and other nonprofits to nurture Easton’s economic vitality, including Easton’s West Ward neighborhood.

A forgivable PPP loan allows GEDP to continue its work in the community.

Match making

He said GEDP has distributed about $5,000 in gift cards that could lead to roughly $20,000 in revenue to personal care salons, among the most economically hard hit businesses in Pennsylvania.

PPP has allowed GEDP to create a “match making” technical assistance program to help businesses move to ecommerce platforms and develop digital marketing plans as a result of Covid-19.

“Relationships that provide different kinds of value, not just lower interest rates or checking account fees,” are important, Mast said.

On a side note, Fulton is part of a $50,000 commitment over six years, along with People Security Bank, PNC and Highmark Life insurance, to build other funders that focus on youth, resident and small business neighborhood improvement initiatives.

“It’s a longer term community commitment we appreciate [having] with Fulton,” Mast said.

SBA launches ‘less intimidating’ PPP application, re-opens EIDL

Following the enactment of legislation that loosened requirements for borrowers to be forgiven for a Paycheck Protection Program loan, federal administrators this week launched a streamlined application form they say will make it easier for some borrowers to fully realize the forgiveness of their PPP loan.

The alternative form cuts down on the volume of calculations and documentation required to apply for a loan from the Paycheck Protection Program (PPP). Borrowers are eligible to apply with this form if they fall into one of the following categories:

  • They are a self-employed individual or their company has no employees.
  • They did not reduce salaries or wages of employees by more than 25% as a result of the COVID-19 pandemic and didn’t reduce employee count or hours they worked.
  • They experienced a reduction in business as a result of health directives related to the pandemic and did not reduce salaries or wages of employees by more than 25%.

This new form is in addition to the agency’s revision of the full forgiveness form to fit the provisions of the recently passed “PPP Flexibility Act.”

“This is great news for small businesses,” said SBA Regional Administrator Steve Bulger, who oversees agency operations in the mid-Atlantic region. “The EZ application requires fewer calculations and less documentation, which makes the process much less intimidating. I’m sure this will go a long way toward improving access and helping us distribute the remaining PPP appropriations to support small business owners and their employees.”

The deadline to apply to receive PPP money is June 30. The latest report from the SBA says there’s still $129 billion left in the second round of the PPP.

This week SBA officials also reopened the Economic Injury Disaster Loan (EIDL) program portal on the SBA website, offering long-term, low-interest assistance for small businesses or nonprofits impacted by the pandemic. Businesses can also apply for an EIDL loan advance of up to $10,000 in emergency relief, which doesn’t have to be repaid.

Employers can use EIDL funds to fill gaps in payment obligations that aren’t already covered by a PPP loan. EIDL loans have long repayment terms, up to 30 years, with no payment due from the borrower for one year after disbursement.

“With the reopening of the EIDL assistance and EIDL Advance application portal to all new applicants, additional small businesses and non-profits will be able to receive these long-term, low interest loans and emergency grants – reducing the economic impacts for their businesses, employees and communities they support,” said SBA Administrator Jovita Carranza.

Landmark changes to PPP headed for Trump’s desk this week

In what trade groups are calling a sign of hope for small and mid-sized businesses, Congress passed a bill this week making significant revisions to the Paycheck Protection Program, which President Trump is expected to sign this week.

The changes arrive as many employers near the end of their eight-week coverage period during which they are required use their disbursements to bring back their full-time employee counts to pre-pandemic levels to qualify for SBA forgiveness. The new bill would triple that covered period to 24 weeks.

“As the majority of small businesses reach the conclusion of their Paycheck Protection Program forgiveness period in the next couple weeks, they are figuring out how to comply with the loan terms while also navigating reopening and rehiring their employees in a safe manner,” said National Federation of Independent Business (NFIB) Government Relations Vice President Kevin Kuhlman said in a statement issued Wednesday.

“The Paycheck Protection Program Flexibility Act of 2020 will further help many small businesses impacted by COVID-19 by reducing the payroll limitation of the program and extending the loan forgiveness period,” Kuhlman said. A June 2 NFIB study conducted at the end of May found that 23% of responding employers’ coverage period ends between June 8 and June 14, while 36% said their coverage period ends in the second half of June.

The PPP has allocated $659 billion in fully forgivable SBA loans for employers to rehire and retain full-time workers while also providing funds for certain other costs like rent and utilities. However, many small business owners have stated that the program’s forgiveness requirements for employers to use at least 75% of their disbursement on payroll costs and no more than 25% on overhead create barriers to revamping their business.

Under the Paycheck Protection Program Flexibility Act of 2020, this 75%-25% ratio of forgivable expenditures would be modified to 60%-40% — with at least 60% spent on payroll costs and no more than 40% on rent, utilities and other overhead.

Employers, initially required to restore workforce levels to pre-pandemic levels by June 30, now have 24 weeks to rehire their full-time equivalent employees. The bill amends the CARES Act legislation to allow employers to defer payroll taxes.

The bill allows businesses to be forgiven for their full loan amount if they are struggling to restore their workforce to pre-pandemic levels due to operating restrictions caused by COVID-19.

“Since keeping workers on payroll obviously requires small businesses to stay afloat in the first place, we are expanding firms’ ability to use these funds to meet obligations like their rent, their mortgage, or their utility bills, but we maintain the overall requirement to avoid layoffs to keep the strong protection for workers in place,” Senate Leader Mitch McConnell said Wednesday.

The bill would also modify the loan terms for employers who choose to accept some portion of their PPP funds as an unforgiven loan by giving borrowers five years to repay the outstanding loan balance instead of two.

“This is a much needed win for the industry, as it addresses the inability for restaurants to use this loan during the shutdown and extends the dates to use the funds,” the Pennsylvania Restaurant and Lodging Association stated in a Wednesday evening tweet.

Since its April 4 launch, the PPP has been defined by post-hoc guideline updates as policy makers have evolved the aim of the aid program to meet the economic burdens of the coronavirus recession; what was initially construed as an aid package for companies to primarily retain and rehire full-time workers has been reformed as one of the sole sources of liquidity for small businesses that have seen revenue shortfalls from mandatory business closures.

Small business employers’ attitudes toward the PPP have been more positive in recent weeks as federal policymakers have addressed industry-specific struggles of small and mid-sized businesses. The NFIB’s June 2 survey reported that 66% of the 619 respondents said their PPP loan was “very helpful” in providing financial support to their business, while another 14% said it was “moderately helpful.”

House bill would extend PPP rehiring safe harbor, increase overhead expense flexibility

House lawmakers passed a bill late last week that would loosen restrictions on businesses using Paycheck Protection Program funds to retain and rehire workers, as federal policymakers work to revise the PPP to help companies recover in the aftermath of mandated closures.

The most recent iteration of the PPP, which has undergone significant revision since it launched in early April, provides business owners with a loan for eight weeks of payroll expenses and money for certain overhead costs. The Small Business Administration (SBA) will forgive businesses if they use 75% on payroll expenses and 25% on certain overhead costs, although many business owners have stated these restrictions aren’t practical for revamping operations due to the economic fallout caused by the COVID-19 pandemic.

The “Paycheck Protection Program Flexibility Act of 2020,” passed Thursday with a resounding 417-1 vote, would extend the covered period during which business owners can use a PPP loan and have it forgiven by the SBA from eight weeks to 24. The June 30 safe harbor for rehiring employees would also be extended through the end of 2020.

The bill awaits approval by the Senate.

The payroll spending requirement for forgiveness would also be lowered from 75% to 60% and would increase the flexibility business owners have for using the PPP to pay for rent, utilities, mortgage obligations and other overhead costs from 25% to 40%.

PPP funds that don’t meet guidelines for forgiveness have to be repaid as a low-interest loan over the next two years with a 1% interest rate; the recently passed House bill would increase this loan term to five years.

Businesses that receive loan forgiveness would be able to defer the employer portion of payroll taxes for the remainder of 2020.

“This bill significantly increases small businesses’ ability to have their PPP loan fully forgiven and will change forgiveness compliance,” said Erik Asgeirsson, president and CEO of CPA.com, in a statement released by the American Institute of CPAs. “The current lack of flexibility in some PPP provisions has created unnecessary challenges. We welcome Congress’s attention to this important issue as it will allow more businesses to apply for and use PPP relief.”

The flexibility act, coupled with recent PPP guideline updates, indicates a shift among policymakers to making PPP modifications that would accommodate small businesses in revamping efforts, said Bethany Novis, a partner with the Consulting Services Group at the Lancaster-based RKL.

“We’re sitting here in June, and some businesses are saying it might be July or August before we can re-open,” Novis said. “[The PPP] quickly changed from protecting their paychecks for a short period of time to their realizing that we need to allow this money to be more flexible to keep businesses in business.”

$6.8B of PPP funds reserved for Community Development Financial Institutions

Daniel Betancourt, president and CEO of Lancaster’s Community First Fund, said the fund was ahead of other CDFIs in approving local business owners for PPP loans. PHOTO/PROVIDED

More than $6 billion of remaining Paycheck Protection Program funds will be reserved for Community Development Financial Institutions to lend to a broader demographic of small business owners, federal officials announced on Thursday.

As of May 23, Community Development Financial Institutions (CDFIs) have approved more than $7 billion in PPP loans — $2.8 in round one and $3.2 billion in round 2. The Small Business Administration (SBA) announced Thursday that $10 billion of round two PPP loans would be exclusively reserved for CDFIs to “ensure that entrepreneurs and small business owners in all communities have easy access to the financial system, and that they receive much-needed capital to maintain their workforces.”

With $3.2 billion already approved by CDFIs in the second round, $6.8 billion is still available for businesses applying through CDFIs.

“Providing American businesses with access to federally-guaranteed capital ensures underserved communities are not left out of our COVID-19 recovery,” SBA Mid-Atlantic Regional Administrator Steve Bulger said in a statement Thursday. “No longer will small business owners in underserved communities just hear about the money. With today’s action, more minority-owned small businesses will be able to access it to survive, thrive and support our economy.”

Daniel Betancourt, president and CEO of Lancaster-based CDFI Community First Fund, said CDFIs offer emergency loans to small business owners struggling to be approved for PPP loans at traditional commercial for-profit lenders.

Many CDFIs weren’t able to participate in the PPP if they didn’t have an existing SBA 7a lending status, Betancourt said in an interview Thursday. Betancourt said the nonprofit Community First Fund was ahead of the curve in processing PPP loan applications because it was pre-approved as an SBA lender, while others still had to be fast-tracked by the SBA.

However, Betancourt said Community First Fund has “flooded” its borrower base with loans and is directing efforts to raising grant funds that business owners can use with no strings attached.

Community First Fund has provided more than 450 loans, amounting to $16 million, to small businesses in Community First Fund’s 20-county region. PPP loans have reportedly helped protect more than 2,700 jobs among Community First Fund borrowers.

Second-round PPP loans are moving slowly, here’s why

There’s still $147 billion available in the second round of the Paycheck Protection Program, according to a report by the Small Business Administration released on Saturday.

The second round’s $310 billion has taken significantly longer to be reserved by business borrowers after becoming available about a month ago, compared to the first round’s $349 billion, which ran out in 13 days.

So, why is that happening? Local lenders offer two reasons: federal officials instituted policies that discouraged larger, publicly-traded businesses from taking up funds that were approved for struggling small businesses; and the PPP’s restrictive requirements have made many small business borrowers reconsider accepting the funds.

The PPP provides 2.5 times monthly payroll costs to businesses with the promise of loan forgiveness so long as they use at least 75% on payroll expenses and no more than 25% on certain overhead costs. Employers would have to take on any amount that goes beyond these limitations as a 1% loan with a two-year maturity.

Approximately 35% of respondents to a May 18 survey by the National Federation of Independent Business (NFIB) said they plan to have some portion their PPP money turn into a loan instead of seeking full forgiveness.

The first round of $349 billion ran out in two weeks, with an average nationwide loan size of $206,021. The $310 billion second round has been live for approximately one month since April 27. The average round two loan size was $115,503, a $90,618 decline from the first round, as of the SBA’s May 23 report.

More than 4.4 million PPP loans totaling $511 billion have been approved as of May 23, according to the SBA, with 155,396 PPP loans totaling $20.5 billion for Pennsylvania businesses.

Luke Bernstein, chief retail officer for Shippensburg-based Orrstown Bank, said larger business borrowers with a finance executive or in-house finance department had access to resources that made for a speedier loan approval in the opening days of the program. Independent contractors and self-employed borrowers had to wait for April 10 to begin applying for their smaller-sized loans.

“The first wave were a lot of businesses that had accountants, attorneys, maybe in-house finance departments, helping them in advance, who knew this was coming, had an application ready, wanted to get it in and they were off and running,” Bernstein said.

In the first 28 hours of the second round, which commenced on April 27, lenders approved $50 billion because they had built up 10-days’ worth of applications from borrowers who had been waiting during the 10-day interim between rounds, according to Bernstein.

Since then, the SBA’s reports indicate the funds have been approved at a much slower rate.

“That first day of round two we worked all night to get our people approved,” said Mike Keim, president and CEO of Univest Bank, a Souderton-based firm with a commercial lending division in Lancaster. “As it turns out, we had a lot more time than we thought we did.”

One major factor in the slow pace of round two loan approvals is the disincentives the SBA established in the interim between rounds to discourage larger, publicly traded companies from reserving PPP loan money, and encourage smaller businesses to take advantage of the funding.

Publicly traded companies were pressured to give back their PPP loan amount and use other sources of income to raise capital. Federal officials also announced ahead of round two that loans of $2 million or more would be subject to an audit by SBA and Treasury Department officials, according to Secretary Steven Mnuchin.

During round one, loans of more than $2 million accounted for 27% of all approved loans. But by May 23, they only accounted for about 20% in round two.

Univest Bank saw millions of dollars come back from PPP borrowers who decided the newest guidelines from the SBA for loans larger than $2 million weren’t worth the risk.

“All those myriad of factors went into effectively pushing down the loan size on the second round, as well as some people dropped out and some people repaid under the safe harbor rules what they had previously taken out in round one, and when they repaid that money, it went back into the available pool,” he said.