The covid-19 relief bill passed last month provides for $284.5 billion in additional funding for the Paycheck Protection Program.
This loan program, administered by the U.S. Small Business Administration, enlists financial institutions to assist small businesses that are still struggling as a result of the coronavirus pandemic. Banks serving Jefferson County are reaching out to those who applied for the first wave of loans as well as new customers to help keep businesses going.
"We had a database of people who applied for the first draw," Simmons Bank regional community President Daniel Robinson said. "We reached back out to a lot of them. I think most are aware they are available. We're trying to make sure our business clients are aware round two of [Paycheck Protection Program] loans are coming."
All program lenders began submitting first- and second-draw loan applications to the Small Business Administration earlier this week. The deadline to apply during the second round is March 31.
First-draw loans are for borrowers who did not receive a program loan before Aug. 8. Second-draw loans are for eligible small businesses with 300 or fewer employees that previously received a first-draw loan and have or will use the full amount only for authorized uses. Such businesses must prove they had a 25% reduction in gross receipts between one quarter in 2019 and the same quarter in 2020.
"A lot of businesses are calling us that got the first round, and the first question is, 'Did you have a 25% reduction for one quarter in 2020 [compared with that quarter in 2019]," Relyance Bank Senior Vice President Steven Brown said. "Some had a reduction, but not all had a 25% reduction."
But the number of those who have met the threshold is significant, Brown added.
"What we've seen is depending on the type of business, it could be a little bit of a lag in business. They may not have realized the lag until the third or fourth quarter. It didn't happen immediately for everyone," he said.
The first round, which ran from March to August, helped 5.2 million small businesses keep 51 million Americans employed, the Small Business Administration said.
Banks participated in the first round of loans, which were made available through the Coronavirus Aid, Relief, and Economic Security Act signed into law last March.
"We had a quite a few apply and obtain loans throughout the first round," Brown said. "We did that through our database, and when the second wave came about, we created a second round where we notified the borrowers."
Patrick Hum, Small Business Administration customer relationship manager at Stone Bank, said his institution identifies whether this would be the first or second draw for a business while trying to communicate with all of its participating members in the most efficient way possible.
Stone Bank also is "being more stringent" in reviewing loans because of widespread fraud not necessarily connected to the institution during the first wave, Hum said.
"The requirements we have are things set forth in banking regulations such as [Bank Secrecy Act] requirements, business ownership, photo ID, those things we would have to have if you were to walk in to establish an account," Hum said.
At least $25 billion is set aside for second-draw loans for eligible borrowers with a maximum of 10 employees or for loans of $250,000 or less to eligible borrowers in low- or moderate-income neighborhoods.
The second-draw loans, the Small Business Administration said, can fund payroll costs including benefits. Mortgage interest, rent, utilities, worker protection costs related to the pandemic, uninsured property damage costs caused by looting or vandalism during 2020 and certain supplier costs and expenses for operations may be addressed with the loans.
Most borrowers may be eligible for a maximum of 2½ times the average monthly 2019 or 2020 payroll costs, up to $2 million, according to the Small Business Administration. Those in the accommodation and food services sector may receive up to 3½ times that figure, up to $2 million.
At Simmons Bank, 320 program loans for $21 million were issued just out of Pine Bluff office in 2020, Robinson said. The bank as a whole issued more than 8,200 loans for just shy of $1 billion and secured more than 100,000 jobs, he added.
"I know we're very happy and proud to be able to do this and work with the businesses in the community to be able to focus on growing and maintaining their businesses," Robinson said. "2020 has been extremely difficult. This program has allowed them to continue to operate and dedicate a lot of our time and resources to customers and those who were not our customers so they can move forward and pay their employees and keep them on their team so we can get through this time and hopefully flourish once we get behind this time of covid."
Relyance processed more than 500 loans during the first wave and 60 in this week alone, Brown said.
The Small Business Administration will forgive a loan if employee retention criteria are met and the funds are used for eligible expenses. Each loan has an interest rate of 1%. Loans issued before June 5 have a maturity of two years, and those issued after that date have a maturity of five years.
Borrowers who apply for loan forgiveness may have their payments deferred until the Small Business Administration remits the forgiveness amount to the lender. If a borrower does not apply for loan forgiveness, payments are deferred 10 months after the end of the covered period for the forgiveness, either eight or 24 weeks.
No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.
To apply for a Paycheck Protection Program loan: Contact Relyance's main office at (870) 535-7222 or any of its branches; visit Simmons' website for the program at SimmonsBank.com/PPP; contact Stone Bank at (501) 503-4242 or via email at ppploans@stonebank.com; or check with your local institution.