More Del. businesses get funding midway through PPP second round

Delaware ranked 47th in approved PPP loans in the program’s second round, according to data released by the SBA on Friday. | CREATIVE COMMONS

Delaware is beginning to see greater benefits from the federal program intended to bolster small businesses through the worst of the coronavirus pandemic, as more than 4,800 businesses have netted funds roughly halfway through the second round.

The U.S. Small Business Administration reported May 1 that $175 billion of the $320 billion allocated for the second round of the Paycheck Protection Plan (PPP) had been loaned nationwide. Of those more than 2.2 million loans approved, Delaware has seen 4,872 businesses obtain loans worth $366.3 million. That ranks Delaware 43rd in terms of loan value and 47th in terms of total loans – it is the 45th most populous state.

Delaware was ranked last overall more than halfway through the first round of $349 billion in PPP funding, before rising slightly in the rankings by the time the funds ran out. SBA Delaware District Director John Fleming told Delaware Business Times that the prevalence of community banks here likely slowed the application process, as Midwestern states with a higher concentration of big-name banks that were quicker to be prepared reaped disproportionate totals.

With many more community banks, credit unions and even online-only lenders like PayPal and Square now in the fray, it appears as if more Delaware businesses will likely get help in this round than the first, when 5,171 received a loan, but they will likely pull in fewer dollars after the state saw an aggregate value of about $1.1 billion last round.

The SBA reported that the average size of second round PPP loans to-date was $79,000, down considerably from more than $200,000 in the first round, suggesting that more small businesses were obtaining the aid. Roughly 12% of Delaware’s small businesses have obtained a PPP loan to date, according to SBA data.

One such business in Delaware to receive a second-round PPP loan was the Seaford Historical Society, which had been waiting weeks for aid to arrive from the program.

Maria Heyssel, treasurer of the historical society, said her nonprofit had applied for an $18,000 loan with M&T Bank in early April. After not hearing back through the first round, they checked back with their bankers who navigated their filing through the second, she said.

“We’ve faced some dramatic changes and this money is going to be a lifeline,” Heyssel said.

The funds will support three experienced part-time employees for the next two months and pay utility bills as the historical society prepares its three properties to hopefully reopen by summer.

Heyssel explained that the organization had been hit financially on two fronts: an impediment on fundraising and cancellation of event and wedding rentals. She noted that they are also worried about the prospect of grant-in-aid monies being cut out of the state’s next fiscal budget as it faces a deficit.

“We were ready to mail our annual appeal for donations and suddenly the world sort of turned upside down,” she said. “We feel [the PPP loan] will enable us to go on.”

Local lenders reported processing millions in loans to Delaware businesses, although most were still processing a long queue of filed applications.

On Monday, JPMorgan Chase reported that it had completed 60 PPP loans in Delaware worth more than $16.2 million throughout the program. The average size of its Delaware loans was $245,000, nearly double its nationwide average.

M&T Bank, which has the largest Delaware presence after buying Wilmington Trust a decade ago, reported that it began processing 1,600 applications it had in queue from the prior round upon the opening of the new round April 27. It did not yet have updated figures for the second round but funded 1,897 Delaware loans worth $335 million in the first round.

Wilmington-based WSFS Bank reported funding more than 3,200 loans across its Mid-Atlantic service area, totaling more than $950 million, as of April 30. It was still processing loan applications received during the first round of funding but is now accepting “expressions of interest” applications. Those requests will be fulfilled if there is still funding available after pending applications are reviewed.

Even smaller community banks were getting a piece of the program, with Fulton Bank processing 60 PPP loans worth $63.8 million and Applied Bank processing about $20 million in loans in Delaware. The majority of second round loans at Applied went to non-customers, a rarity in the program, said Matthew Lee, president of Applied Bank.

The SBA program, approved by Congress in March as part of the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, intends to provide small businesses 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.

The loans are underwritten by the SBA using the now $669 billion in stimulus funds, but the program required SBA-approved banks to process the applications for eligibility in order to expedite the massive amount of work. In turn, banks received a fee for their work.

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, that debt will be forgiven. That eligibility requires an employer to maintain workforce and salary levels and rehire furloughed employees.

Even after receiving a loan, some businesses are investigating whether there may be flexibility in how to use the funds, as many don’t expect to see significant patronage for weeks and or even months. Some employers are also facing pushback from laid-off staff who would rather collect unemployment benefits, which are often higher than previous wages right now due to subsidies, while awaiting a stronger return of customers.

“We’ve applied for everything and are trying to figure out what works best,” said Scott Kammerer, chairman of the Delaware Restaurant Association and owner of SoDel Concepts. “The PPP is really good for companies that are currently open and carrying payroll and doing carryout. It’s a good lifeline but doesn’t work for businesses that can’t bring people back.”

By Jacob Owens

jowens@delawarebusinesstimes.com