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Round 2 of PPP funding expected to go quickly

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Ed Osborne received funding through the first round of the SBA’s PPP allocations. | DBT PHOTO BY JACOB OWENS

Delaware bankers say they’ll first serve the applicants that remain in the pipeline for $310 billion in Paycheck Protection Program (PPP) funds after the first round’s $349 billion ran out in less than two weeks, although employers should immediately check with their banks to see if they’re accepting new applications.

The message for businesses seeking a PPP loan that haven’t reeived one yet was simple, said SBA Delaware District Director John Fleming: Don’t delay, the funds won’t last long. The SBA is scheduled to begin signing off on PPP loans starting at 10:30 a.m. Monday, April 27.

“From everything we’re estimating, this money will be gone in a couple days,” he said.

Fleming advised that any business owner who does not know the status of their application through their traditional bank or who hasn’t yet applied to do so through an approved online lender, such as PayPal, Square or Kabbage, in order to increase the likelihood of processing before the funds run out again.

Ed Osborne, owner of Osborne’s Auto Repairs in Wilmington, was one of 5,171 Delaware business owners who was able to secure a PPP loan in the first round, getting $19,800 from TD Bank. 

“If you applied early you had a good shot of getting some money,” he said. “If you didn’t, you probably missed out.” 

Osborne said that he talked with TD about the program before application forms were even ready and submitted one as soon as they were available on April 3. Even then, he did not hear anything back for a week, hearing on April 16 – the day that funds nationwide were exhausted – that he should be getting some relief. 

“My anxiety level at 3 o’clock was very high and at 3:30, when I got the acceptance email, I felt a lot better,” he said. 

The original $349 billion program, approved by Congress in March as part of the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, provides 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 stimulus funds, but the program required SBA-approved banks to process the applications for eligibility in order to expedite the massive amount of work. 

The rollout of PPP loans was notably rocky, with the SBA posting its instructions for the program the night before it was set to open. Some banks were slower to get enrolled while larger banks with established infrastructure for application processing doled out billions in funds.  

Delaware small businesses got a more than $1 billion chunk of the pie, but still saw less support than other less populous states. The U.S. House of Representatives and Senate passed a bill this week that adds another $310 billion in PPP funding, and President Donald Trump said he would sign it Friday.

Local lenders were reportedly making decisions about how they’ll handle the second round. 

“We will continue to work with customers who submitted applications prior to April 16,” said Rebecca Acevedo, a WSFS Bank spokeswoman. “Once we have submitted the previously received applications, we will reopen our online application and start accepting new applications, if PPP funding is still available.” 

M&T Bank received about 30,000 applications across its footprint, compared with about 1,500 in all of 2019, according to spokesman Scott Graham. The bank successfully processed more than 96% of eligible applications and was able to fund 1,610 loans in its Delaware region worth more than $315 million.  

Other banks contacted for this story could not break out their numbers for Delaware, although TD Bank did say that nearly 82% of the $6.1 billion in loans it approved went to businesses with 25 or fewer employees. 

For Delaware’s beleaguered restaurant industry, the program has provided some relief. The Delaware Restaurant Association conducted a survey of its members and got answers back from about 20%, most of whom applied for the loans, with 78% receiving approval.  

Michael Stiglitz, owner of the Newark-founded Two Stones Pubs that operates four Delaware locations and two in Pennsylvania, got a PPP loan for all his locations from WSFS and said he thinks the process is working.  

“I received the money [April 22] for my Naamans Road restaurant and have eight weeks to use it by recapturing my same number of positions I had a year ago,” he said. “That’s both a blessing and a curse. I have to immediately find these people and get them back on the payroll and off unemployment until at least June 20 when the program runs out.” 

Stiglitz, who was expecting the money for his other restaurants to come soon, said most employees won’t be asked to come in to work right away, but the purpose of the PPP program is to make sure they’re ready when the doors can be reopened. 

“There’s no reason to rush everyone back,” he said. “We’re waiting for the governors’ lead, but people will be ready, the stores will be cleaned again, and we’ll fire up the refrigeration and equipment.  We’ve been in contact with our vendors and if it’s too far in the future, we’ll start doing takeout and curbside,” he said. 

Stiglitz laid off more than 200 people when Gov. John Carney closed sit-down service but chose to pay their health care costs throughout the crisis. He took a philosophical view of the argument that people can make more on unemployment under the federal program than they will if they come off. 

“Someone is going to have to pay that bill sometime,” he said. “The unemployment fund will have to be repaid. If you’re on unemployment, it runs out July 25 and if you’re offered the opportunity to go back and decline it, your claim could be declined. When I’m asked for advice, I tell my people to be smart and not take advantage of the system. Don’t milk unemployment because it could blow up in your face.” 

Delaware moved up slightly in the state rankings for the PPP program after ranking last in a preliminary report on the program’s first 70% of allocations. The First State saw 5,171 loans approved for a total of just under $1.1 billion – ranking 49th in loans approved and 47th in aggregate value, despite being the 45th most populous states. 

Across the country, more than 3 million loans were approved by nearly 5,000 lenders, the SBA reported April 16. Of those loans, 74% sought $150,000 or less, but more than 40% of all dollars allocated went loans of $1 million or more. 

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. 

That aspect is important as business owners like Osborne contend with dramatically different marketplace amid the pandemic. Osborne, who has run his auto-repair shop on A Street for 32 years, said he has never seen the decline in business that he has during the pandemic. 

“Probably 95% of my business is city office workers,” he said, estimating the 30,000 cars coming into the city each day has fallen to maybe 5,000 in recent weeks. “My business basically left town.” 

Osborne, who is not related to one of the authors, said the loan would fund his payroll of two: him and his son. Although he could shut down and claim unemployment – technically the shop is owned by a limited liability corporation of which he is an employee – Osborne said he has never wanted to rely on such assistance.  

If the pandemic persists and the eight weeks of payroll expire without reopening in sight, Osborne said he was not sure how long he would try to gut it out. 

“Business is still trickling in,” Osborne said, noting that he is relying on a loyal customer base. “But I sat here for three days and not one person came in or called.” 

By Jacob Owens and Peter Osborne 

Contact Jacob Owens at jowens@delawarebusinesstimes.com and Peter Osborne at posborne@delawarebusinesstimes.com. 

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