Delaware ranks at bottom of PPP 2.0 lending

Delaware ranked last in approved PPP 2.0 loans, according to data released by the SBA on Jan. 31. | CREATIVE COMMONS

WILMINGTON – Nearly 2,000 Delaware businesses have obtained Paycheck Protection Program loans through the first weeks of the restart of the U.S. Small Business Administration program.

As of Jan. 31, more than $194.8 million had been loaned to 1,902 state businesses, ranking last of all 50 states in loans obtained and second to last in dollars allocated, according to SBA data. Despite having nearly 40% more residents than the least populous state Wyoming, Delaware obtained nearly 2,000 fewer loans and $90 million less than its smaller peer. It’s a familiar position for the First State, which started among the bottom of the program’s first round of lending in April 2020.

By the end of the second round of funding in August, however, Delaware had risen a few places in both rankings to finish closer to its 46th population ranking.

A new round of PPP lending began Jan. 11, starting with a targeted opening to lenders that serve underserved communities, and opened more broadly Jan. 19. The PPP was the federal program most acutely tailored to the economic recovery of businesses impacted by the effects of the COVID-19 pandemic, offering low-interest loans that could be entirely forgiven under certain terms.

Originally instituted under the CARES Act passed by federal lawmakers in March 2020, it doled out $525 billion of the $659 billion appropriated by Congress before the program expired in August. Delaware businesses received more than 13,000 of those loans worth more than $1.5 billion.

Under the second stimulus package approved by Congress and President Donald Trump in December, the PPP was restarted with $284 billion to allocate through March 2021, including at least $15 billion targeted at those underserved communities.

When the loan portal reopened on Jan. 11, it initially accepted first-time PPP loan applications from participating community financial institutions (CFIs), but it appears the interest was lukewarm. SBA data shows about only 5% of loans processed came from a CFI, and they accounted for about $3.4 billion of the $72.7 billion allocated. The only participating CFI in Delaware was Wilmington-based True Access Capital.

The third round of lending has been the most popular with those seeking a second PPP loan, with about 75% of loans going to second-time borrowers nationwide. These loans are capped at $2 million rather than the prior $10 million, and only be eligible to businesses with 300 or fewer employees, versus 500 in the first rounds.

Borrowers need to prove at least a 25% reduction in gross receipts in a 2020 comparable quarter, which could be a reason for the declining interest in the loans. The terms of the loans in the third round are more favorable though, as the cover period can be set anywhere from eight to 24 weeks and cover additional costs, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures.

Hotel and restaurant operators are also now allowed to apply for up to 350% of monthly payroll versus the 250% allowed in the earlier round, to address the disproportionate impact they have shouldered this past year. That seems to be effective, as about 18% of loans went to those industries so far, totaling nearly $13 billion.

Virtually all of Delaware’s largest lenders, including M&T Bank, WSFS Bank, PNC Bank, TD Bank, Chase Bank, Bank of America, Citizens Bank, Fulton Bank, and more, are participating in the PPP again. WSFS, one of the state’s biggest banks, has outsourced its PPP lending this round to loan servicers ACAP and The Loan Source.

“This arrangement allows us to expand our reach to more non-WSFS customers, including those in underserved communities who struggled to gain access to PPP funds in the first round,” WSFS spokesman Rebecca Acevedo said. “Together with ACAP and The Loan Source, we are confident that our customers and others in our community will be best served by our joint efforts and once again, we will achieve extraordinary results.”

Meanwhile, one of WSFS’s biggest local competitors will continue to handle PPP lending through in-house loan officers. Barney Hughes, the regional manager for Delaware and the Eastern Shore at M&T Bank, said that roughly 2,000 employees had been placed on a team to handle PPP applications across the bank’s eight-state footprint, including more than 1,000 applications from his territory.

“This time feels far more under control,” he said, noting that the bank is carefully reviewing applications prior to submission to the SBA to reduce headaches and revisions for borrowers. “It’s really hard to predict, but it feels like at the pace that we’re rolling, the money will last.”

The first allocation of PPP loans lasted just days as borrowers rushed to ensure they received funds. That pace slowed under the second round and ultimately more than $100 billion went unspent. While some filed applications for the third round early, the pace has similarly slowed in the days following.

Hughes noted that M&T Bank, the largest SBA lender in Delaware last year, is accepting new customers as part of the third round of PPP lending, something it didn’t do in the earlier rounds.

“I’m hearing lots of good success with that as prospects of ours are now joining us,” Hughes said.

Hughes emphasized that for those who have never obtained a PPP loan, they would still qualify under the original terms of the PPP, including higher employee counts and loan limits as well as easier eligibility factors.

Some smaller banks like Fulton Bank, headquartered in Lancaster, Pa., are also still tackling the PPP through in-house staff. Fulton has about 150 employees working on the program, said Steve Trapnell, the bank’s vice president and senior communications consultant. So far it’s had more than 2,775 loans approved by the SBA, including more than 200 for customers in Delaware.

“We appreciate the opportunity to once again work with our customers to help them obtain the financing necessary to operate their businesses in the midst of the ongoing pandemic,” Trapnell said, noting Fulton processed 10,000 PPP loans worth more than $2 billion last year in its five-state footprint.