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OPINION | ANDREW MOREAU: Another round of virus-aid loans opens to small businesses in state

by Andrew Moreau | January 17, 2021 at 2:10 a.m.

Many small businesses in Arkansas can again rely on federal aid to fight off the coronavirus pandemic with financial support through the revived Paycheck Protection Program.

The U.S. Small Business Administration renewed program funding last week with $284 billion approved by Congress in December. Like the initial loan program that began last spring, Paycheck Protection Program loans are set up to essentially cover payroll and other costs for up to 24 weeks.

When covid-19 began ripping through the economy last March, Congress created the Paycheck Protection Program to provide economic aid for small businesses to help them stay open and keep workers on the payroll during the pandemic.

The initiative aimed to help less-established firms that did not have strong banking relationships or lines of credit they could draw from during the economic crisis. Loans are 100% forgivable if they meet the lending rules.

In December, as the pandemic continued to spike and the program had expired, Congress passed legislation to extend the loan program through March 31.

In this latest round, small businesses can have their payroll expenses paid from 8 weeks to 24 weeks and the company gets to choose the right time frame based on its needs. Any money borrowed through the initiative is completely forgivable, meaning the business owner is not obligated to repay any portion of the loan if it is used to cover eligible expenses.

This time around, SBA officials, lenders and borrowers believe that there is enough money to target small businesses most in need and that the loan application process will be more deliberate without the fear, frenzy and fraud that fueled the process last spring.

The program shuts down March 31 for all loan applicants. So far, SBA has slowly rolled out the program to lenders.

In the first four days, only community financial institutions, community development financial institutions and micro lenders were allowed to submit loans; there are about 18 of those in Arkansas, according to the SBA. Banks with less than $1 billion in assets were allowed to begin submitting loans on Friday. The SBA lending portal will be open to all banks beginning Tuesday.

Exclusive availability has been trumpeted by the agency as a way to serve minority communities and small businesses that didn't receive financial aid through the program last year.

SBA has a new mandate to expand loans to organizations and businesses that were left out of the first two rounds: 501(c)(6) organizations such as chambers of commerce and trade organizations and owners of venues such as music and comedy clubs and theaters.

Even more, Paycheck Protection Program funds can now be used to cover additional costs and expenditures, including operational expenses, property damage, supplier costs and spending on worker protection efforts such as drive-thru areas, ventilation and sneeze guards.

Most importantly, the first week of funding has been open only to community financial lenders that specialize in reaching underserved minority communities and only those small businesses that have not yet received program loans have been allowed to apply. And applicants are being asked to submit more details about operations to reduce fraud.

Restaurants and hotels that have been ravaged by covid-19 as a result of dine-in restrictions and public health concerns also get a boost: They can now borrow up to 3½ times payroll under the new rules; the previously were limited to 2½ times payroll.

Venue owners and businesses that support the arts now also can apply for up to $10 million in grants. Paycheck Protection Program loans have been expanded to include theatrical producers, talent representatives and venue promoters, live performing arts organizations, movie houses and cultural institutions.

Under the new rules, existing borrowers can apply for a second loan – but only if they have fewer than 300 workers and demonstrate they experienced a 25% reduction in gross receipts during any quarter in 2020 compared with the same quarter in 2019.

Second-time borrowers must have used or will use the "full amount of the initial PPP loan for authorized purposes on or before the expected date of disbursement" of the second draw. They also will be limited to borrowing $2 million; businesses with up to 500 employees could borrow up to $10 million in last year's program funding.

Another attractive feature extends a provision that pays the principal and interest on certain SBA loans, such as 7(a) loans, the agency's primary lending program. It also provides support for the 7(a) program by increasing the amount of the SBA's guarantee for lenders.

BANK EARNINGS

Arkansas' three largest public banks begin reporting earnings this week, with both Bank OZK of Little Rock and Home BancShares Inc. of Conway scheduled to announce year-end results Thursday.

They will be followed by Simmons First National Corp., which reports results before the stock market opens Jan. 26.

Home BancShares is scheduled to be the first to report with an announcement planned before the market opens Thursday. Bank management is holding a conference call at 1 p.m. Thursday; interested parties can dial in at 1-877-508-9586.

Bank OZK plans to release earnings Thursday afternoon after the market closes. Its conference call is scheduled for 10 a.m. Friday and will be available at 1-844-818-5110.

Simmons of Pine Bluff said it will announce earnings before the market opens on Jan. 26. The bank's management call is at 9 a.m. that day and can be accessed at 1-866-298-7926.

CONDUCTOR CHUGS ON

Covid-19 is not slowing momentum at the Conductor, the Conway entrepreneurial support organization that continues to provide much-needed mentoring and assistance to entrepreneurs and start-ups in the state.

Conductor, a public-private partnership between the University of Central Arkansas and Startup Junkie Consulting, moved many services to streaming and webinars in 2020 to reinforce health protocols in the pandemic.

More than 5,200 participants were reached through events and services, including 358 K-12 students, the organization announced in releasing its 2020 annual report. About 95% of participants said they learned something new to help their businesses and 71% said they added new products or services last year.

[CORONAVIRUS: Click here for our complete coverage » arkansasonline.com/coronavirus]

The pandemic was a dominant theme – 60% of the organization's clients said they interacted with the Conductor for covid-19 relief programs or consulting.

"Although 2020 was a challenging year, it has encouraged and enabled our team to continue to serve our community in new ways," said Grace Rains, director of operations.

Conductor uses third-party funding sources to provide no-cost services to entrepreneurs and start-up innovators. The full report is available at arconductor.org/team.

SUPPORTING WOMEN

The U.S. Small Business Administration is offering two webinars to help women-owned businesses become certified to work with the federal agency.

SBA has released new requirements and women-owned businesses seeking federal contracts are encouraged to participate in the webinars to learn how to register their firms.

The Arkansas district office will host a webinar at 11 a.m. Thursday and again at 3 p.m. on Jan. 28. Go to sba.gov to register and learn more.

Column ideas or recommendations? Thoughts or musings that need pursuing? Contact me at amoreau@adgnewsroom.com or at 501-378-3567.

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