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Delaware ranks last in nation for PPP loans as funds dwindle

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

WILMINGTON – While Delaware may be known as the First State, it is last in the nation in terms of total loan approvals and sheer dollars under the U.S. Small Business Administration’s Paycheck Protection Program. Its window to take advantage of the program may also be closing as the funds are reportedly almost exhausted unless Congress intervenes.

Delaware small businesses have received 1,974 loans totaling $590,422,870 as of April 13, according to SBA data released Monday. That ranks the state last among all 50 states in both loan total and aggregate value, only topping the District of Columbia and overseas American territories.

Even less populous states than Delaware, such as Wyoming, Vermont and Alaska, fared better in both categories. Wyoming, which has 40% fewer residents than Delaware, saw 5,730 loans approved for a total value of $706,932,317.

When compared with neighboring states like Pennsylvania, New Jersey and Maryland, the gulf is even more stark. Pennsylvania saw 36,604 loans approved totaling more than $9.9 billion, New Jersey saw 17,187 loans totaling nearly $5.9 billion, and Maryland saw 11,937 for more than $3.9 billion.

Across the country, more than 1 million loans totaling $247.5 billion were approved by more than 4,600 lenders in the first 11 days of the program that has been marked by confusion. Of those loans, 70% sought $150,000 or less, but nearly half of all dollars allocated went to loans of $1 million or more.

The $349 billion program, approved by Congress in March as part of the $2.2 trillion CARES Act, intends to provide businesses with 500 or fewer employees with collateral-and-guarantee-free loans to pay up to eight weeks of payroll, as well as benefits. It can also be used to pay rent, utilities and interest on mortgages.

Payments on the two-year loans with 1% interest are deferred for six months and if at least 75% of the loan is used on payroll costs over the eight weeks, that debt will be forgiven. That eligibility requires an employer to maintain workforce and salary levels and rehire furloughed employees. If workforce or compensation levels fall, the level of forgiveness on the loan will decline as well.

As far as Delaware’s last-place position, SBA Delaware District Director John Fleming told Delaware Business Times that it wasn’t wholly unexpected due to the prevalence of community banking here and the state’s smaller population.

“Credit unions are a lot more popular and prevalent in the Northeast, and when you go out west you see that large banks really dominate SBA portfolios,” he explained. “The large banks are the ones that jumped on [the PPP] first and had the systems and money to build an infrastructure to process right away.”

Fleming noted that his office had been working with several smaller banks in Delaware in recent days to get them set up to participate in the PPP –  the most recent one gaining access Friday – and so he expected to see Delaware’s participation level rise in future reports. SBA does not yet have a statewide breakdown of loans by lender, he added.

Also potentially aiding the flow of PPP loans is the U.S. Treasury Department’s approval of fintech companies, such as PayPal and Square, to participate in the PPP. That could help businesses that don’t have established relationships with a bank currently processing the program or those who work with community banks that are overwhelmed by applications.

“Maybe you’re a one-man show and you’re trying to get [applications] out now. Rather than see some of your customers go across the street to a bigger bank, PayPal or the other fintechs might be a great option for your customer you want to take care of,” Fleming explained. “PayPal is not going to steal their banking relationship.”

Although anecdotal reports from applicants differ between pursuing a loan with a larger corporate bank or a smaller community bank, due to different total loan disbursement levels and application volumes, Fleming said that his office is recommending that applicants turn first to their current relationship with a bank, many of which have reported that existing clients would get preference.

Some of the larger banks are reporting a backlog of applications that is slowing down the process, but SBA has also mandated that banks disburse funds within 10 days of approval, Fleming added.

“That’s never been done before. We just don’t want them sitting on the money and waiting,” he said.

Fleming estimated that an approved applicant was probably looking at a wait of three to four weeks from filing an application to seeing money in their accounts though.

Several of Delaware’s lenders told Delaware Business Times that they are processing PPP applications as fast as they can.

A spokesman for M&T Bank said that its loan applications are being processed in a first-come, first-served manner, as prescribed by SBA.

“We are continuing to process PPP applications as quickly as possible, with the goal of providing assistance to the greatest number of businesses in the shortest amount of time,” M&T Bank spokesman Scott Graham added.

WSFS Bank spokeswoman Rebecca Acevedo said that it was accepting PPP applications from existing customers and had begun funding of the loans in Delaware.

“Our team is working hard to assist our customers as quickly as possible,” she added.

A spokeswoman for Chase Bank said that it was working with 300,000 businesses nationwide on loans representing about $37 billion. To date, Chase has funded $9.3 billion in loans, impacting businesses with 700,000 employees, although data specifically for Delaware wasn’t available.

Matthew Lee, president of Applied Bank, said that his bank had approved dozens of loans worth about $10 million to date, and was looking to process more in the pipeline. After servicing Applied’s current customers, Lee said that his bank wanted to aid others awaiting word from larger institutions and began accepting loans from new clients.

Perhaps most troubling for affected Delaware businesses, however, is the rapidly dwindling funds for PPP loans, of which about 70% has already been approved in its first 11 days. Unless Congress approves additional funding for the program, the funds are likely run dry this week, according to officials, despite the program’s June 30 application deadline.

Congressional Republicans have proposed an additional $250 billion for the program, but Democrats are trying to tie hundreds of billions of dollars for state and local governments in the same package.

In response to a DBT inquiry regarding Delaware’s PPP ranking and potential further Congressional funding, a spokesman for U.S. Sen. Chris Coons (D-Del.), who serves on the Senate Small Business & Entrepreneurship Committee, said that “Senator Coons helped write several of the key small business support provisions in the CARES Act, and he’s working overtime to ensure that Delaware businesses get the resources they need. He’s currently working to pass additional relief funds for small businesses and nonprofits, and he’s leading efforts to ensure that community banks and small lenders are also empowered to support their customers, too.”

By Jacob Owens

[email protected]

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