When the federal payroll protection program essentially ran out of money on the morning of April 16, ending the $ 349 billion forgivable loan program in less than two weeks, it was like musical chairs: Would your business be one of the $ 1.6 million to get their loan approved before the music stops?
Great NH Restaurants in Bedford have received 10 approvals for each of their various T-Bones, CJ’s Western Grill and Copper Door restaurants. The money landed in his bank account the day after Easter.
Yankee Publishing Inc. in Dublin – the parent company of NH Business Review – got a $ 1.25 million loan approved, but the deadline has yet to see a dime.
Kilwins, a candy store in Portsmouth town center, heard nothing, although owner Jannette Desmond twice called for help.
“It’s a mystery to me,” Desmond told the NH Business Review on April 17.
Ultimately, nearly 40% of New Hampshire businesses have or will get a loan that, if they spend it on their labor and other necessities, would turn into a grant. That’s a much higher percentage than most states, and much higher than the country as a whole.
The paycheck protection program, which caused a massive rush on local banks, ended almost as suddenly as it started.
Joe Bator, executive vice president of Primary Bank, learned of his disappearance at 10:20 a.m. on the morning of April 16 when a message appeared on his screen while working on a handful of last-minute loans.
“The people who came to our house this morning, they just ran out of time,” he sighed.
The loan program was to last until the end of the year. Indeed, some members of Congress were originally concerned that businesses would not hear about it and profit from it. Instead, the banks were overwhelmed.
There is bipartisan support to rebuild the agenda, but there is no bipartisan agreement on much else. Republicans want to inject an additional $ 250 billion into the PPP. Democrats want more than that, plus more money for communities and hospitals. Efforts are also being made to make it easier to obtain future loans and to provide more flexibility in when to bring workers back.
How it works
The PPP was Congress’ attempt to stop the bleeding of jobs following the coronavirus crisis and emergency orders in most states that shut down all but essential businesses.
Here is how it works.
A “small” business with fewer than 500 employees can “borrow” 2.5 times its average monthly payroll (which includes benefits but is limited to salaries not exceeding $ 100,000) up to $ 10 million for two years at 1% interest rate, with no payments due for the first six months. But most or all of that will be forgiven as long as at least three-quarters of the money goes to pay for an equivalent workforce (in terms of staff, rate of pay, hours, and labor). benefits) for eight weeks. If part of the workforce is removed, the amount of the discount will suffer the same fate proportionally.
The other quarter of the loan can also be canceled if it is spent on necessary expenses like rent, mortgage payments or utilities.
But first, a business has to find a bank, and it’s better if it’s a bank you have an account with, or you’ll be pushed to the back of the line.
New Hampshire’s share
The high demand in New Hampshire indicated the great need. And New Hampshire appeared to be hit hard by this recession. The state – which processes nearly 125,000 initial unemployment claims lodged in less than a month – led the country with a 6,429.42% increase in claims in April, compared to before the crisis began in in mid-March, according to a recent report. through WalletHub. And the state appears to have gotten its fair share of the PPP, according to SBA data released on April 17, the day after the program ended.
The local SBA office approved some 11,682 loans to New Hampshire businesses, totaling $ 2 billion, for an average disbursement of $ 173,274.
This represents 39.3% of the state’s small businesses, based on 2017 census data, ranking it 17th and much better than the national percentage of 29.8%.
At the top, in percentage terms, were Nebraska (58.2%), North Dakota, South Dakota, Oklahoma, Iowa and Kansas. When it comes to New England, New Hampshire is behind Maine and Vermont, but ahead of Massachusetts. California is at the bottom of the list, with less than 15% of loan recipients. New York and New Jersey – the epicenter of the pandemic – ranked third and fourth from the bottom, with approval ratings of less than 18% each.
Advantage of community banking?
New Hampshire even better measures loan amount per employee. In other words, if the loan total were distributed among every worker in a company, it would rise to just over $ 6,676 per employee, which would rank New Hampshire eighth nationally. The national average is about $ 1,000 lower.
“The best-performing states have more community bankers on the ground who know their clients,” Bator said. “We were able to mobilize our resources to do a year of business in a few weeks. Large institutions that are going to run a program through a web platform are going to lose people. “
Before the program closed, the SBA approved 393 of Primary’s forgivable loans for $ 98.7 million – 10 times the number of SBA loans the bank processed throughout the year.
Tom Boucher, owner and CEO of Great NH Restaurants, was one of the borrowers.
His nominations arrived on Friday April 3 and were approved at the end of that weekend. On Tuesday, it was able to start hiring 100 of its 250 full-time workers, as the chain added more labor-intensive curbside pickup, while others prepared for training.
“It was a lifeline,” he said. “This will save my business. “
But while that was enough to get him through eight weeks, he and other restaurants will need even more help in May, when the money runs out.
“You are going to see restaurants that are not going to make it,” he said.
Boucher’s business got his money pretty quickly, and he expects most of it to be forgiven. But it doesn’t always work that way.
Take Yankee Publishing. Despite an expected drop in her income, she still pays her employees to work remotely. So she applied for a loan of $ 1.25 million depending on the size of her payroll. This part will be forgiven. But the business doesn’t anticipate needing the rest for other expenses, so it will likely have to bring in between $ 100,000 and $ 200,000.
Yet “this is essentially a grant program in the form of a loan,” said YPI CEO Jamie Trowbridge. “There is no pain in having to pay part back here.”
But there is some anxiety. Like many of those who got loan approvals, Trowbridge had yet to see the money in his bank account on April 17.
“The delay is a bit disconcerting,” he said.
Desmond, of Kilwins, is also worried. She had to re-apply, since her bank ended up changing third-party providers. But she hadn’t heard from the new one either.
“It’s very frustrating,” she said.
Also, after Easter, she won’t have a lot of staff to hold back for those eight weeks if the money arrives. “I’m going to have to pay them to stay home. She could use the money later, “when we get to the new normal, whatever it is.”
But she was approved for another SBA emergency loan program – an economic disaster loan, which is made by the agency itself, not through a bank. This loan, capped at $ 2 million, is for a 30-year term at an interest rate of 3.75%.
She also had to apply twice because Congress changed the application process to provide an advance of $ 10,000 that she would not have to repay. She received the grant, which immediately left her bank account to pay the rent, but the loan – “which was much larger than I expected,” she said – ended up being turned down. without explanation.
“I can’t believe they gave me an advance on a loan and then turned me down on the loan. The government is so messed up right now and it’s really disrupting my business, ”Desmond wrote on Saturday April 18. “I won’t sleep well tonight. “
The EIDL program is also strapped for cash, although a deal is underway to inject an additional $ 50 billion.
The latest push to take advantage of the P3 program came from sole proprietors, who were not allowed to submit claims on April 10, leaving them less than a week before the program ran out of money. Banks found it more difficult to process these loans as they generally needed a tax identification number. Many self-employed people use their social security and may not have their books in order.
But Swift Corwin, the owner of Corwin and Calhoun Forestry, a consulting firm in Peterborough, managed to finish on time.
Corwin depends on the “winds of the economy”, which are not blowing on him these days. Yes, he said, toilet paper is made of wood, but so are houses, and construction has taken a hit and the market is “soft” and he expects it to soften. But Corwin doesn’t want to collect unemployment – a suddenly new option for the self-employed – even though the improved benefits could result in more income than he gets for his business.
“I want to be able to work,” he says. “I didn’t die in the water, just partially died in the water.”