Summit County banks prepare as 2nd round of Paycheck Protection Program opens to small businesses
A new round of the federal Paycheck Protection Program began to roll out Friday, Jan. 15, and was open to all lenders on Tuesday, Jan. 19.
While similar to the first round, in that the program provides a loan to small businesses that is intended to be forgivable, there are some notable differences when it comes to eligibility and the loan amount — specifically for the hospitality industry.
Frances Padilla, district director for the U.S. Small Business Administration in Colorado, explained that there is a narrower eligibility for this round of the program, including a lower cap on the number of employees for businesses that are applying for a second time: Only businesses with 300 or fewer employees can apply, down from the previous limit of 500 employees. Business owners have to prove they’ve experienced a revenue reduction, too.
Padilla added that eligible expenses of the loan have been expanded to include personal protective equipment, expenses related to changing a business to comply with COVID-19 restrictions, and certain human resources and IT expenses.
Alpine Bank Regional President Matt Hanson explained that anyone in the accommodation and food services sector, which includes hotels, restaurants and bars, is eligible for a higher maximum loan amount — 3.5 times their average monthly 2019 or 2020 payroll costs instead of the standard 2.5 multiplier used by all other sectors. Hanson noted that while businesses must demonstrate a 25% drop in gross receipts, that decline can be from any quarter in 2020 compared with the same quarter in 2019. The second quarter of 2020, in which Summit County was shut down for part of the time, would be an easy bar for local business owners to demonstrate loss, Hanson suggested.
For business owners who took a loan in the first round of the Paycheck Protection Program and now want to apply for the second round, Hanson said they must show that all the funds from the first round were used in an authorized way. Businesses do not have to have filed for forgiveness from the first round to apply for the second round. He said that while businesses are interested in applying for the second draw, there isn’t the same frenzy that banks saw the first time around.
“When PPP Round 1 started for us in Colorado, here in Summit County, things were shut down and people were desperate for any amount of capital that could be injected into their business and looking for something that would at least give them stabler footing going into the summer, and I think the PPP did that,” Hanson said. “I think now with this new round, certainly there are some different qualifications on it, but I think a lot of people have weathered a lot of the storm and aren’t as desperate for those funds as they were the first time around.”
Hanson said he expects that many business that were closed in the spring now have their doors open in some capacity. He said it’s also a busy time of year, so while business owners might not be making the revenue they’re used to, they still have their businesses keeping them busy rather than urgently waiting for news of aid amid a shutdown. Generally, Hanson said Alpine Bank has been hearing more interest from the restaurant and retail sectors.
FirstBank’s Summit County Market President Nick Brinkman said the bank is fielding phone calls from customers who did the first round of the program and are interested in a second round, as well as customers who weren’t able to get in on the funding the first time. He said FirstBank also is hearing from a number of restaurant owners. Brinkman said he is confident this round of federal Paycheck Protection Program funding will go more smoothly for banks now that they know what to expect.
“Banks are significantly better prepared for this round,” Brinkman said. “FirstBank, for example, in the first round, we were just trying to piece everything together from a technology and personnel perspective. And now we feel like we’re in a really good position not only with the technology, but we’ve also set aside a very large group of employees who will be exclusively focused on PPP.”
Brinkman recommended that business owners touch base with their lenders to make sure they understand the requirements of the program this go-round. For businesses that don’t have a lender, Padilla directed people to the Small Business Administration’s Lender Match tool, which connects clients to approved lenders.
As for businesses themselves, there are mixed views on the latest round of the program. Lauren Hitchell, owner of Studio B Dance Center, plans to apply once her bank releases applications. Hitchell participated in the first round, using funding to pay rent. In this round, she plans to do the same.
“At this point, anything helps because the 10% (capacity restriction) just about put me under,” Hitchell said.
Lisa Robinson, owner of Lovesome Photography, doesn’t plan to apply for the program. She said in a Facebook message that incomes in the event photography industry vary widely from month to month, making paychecks inconsistent and determining average income difficult.
“From finding banks that offered (the program), to the convoluted web system that was often broken or not working … to no guarantee of forgiveness, it is just a dumpster fire I don’t want to touch,” Robinson wrote.
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