PPP helps small businesses stay afloat

By Ruth Melville

On March 27, President Donald Trump signed into law the CARES (Coronavirus Aid, Relief, and Economic Security) Act. At $2 trillion, it is the largest stimulus bill in U.S. history and is intended to counteract some of the worst economic effects of the coronavirus pandemic.

A crucial part of the CARES Act is the Payroll Protection Program (PPP), which provides government loans, administered through the Small Business Administration (SBA) and the Department of the Treasury, to aid small businesses and keep people employed. The money is to be used to pay for payroll, rent, mortgage interest and utilities. There are no fees, no payments for the first six months and reasonable rates. Provided certain terms of the loan are met, including keeping employees on the payroll for eight weeks, the entire loan is forgiven. The PPP was initially funded at $349 billion, but that was later raised to $669 billion.

Applicants have to apply through an SBA-approved lender. The National Iron Bank, with branches in Norfolk, Cornwall, Salisbury and Washington Depot, is a small local bank that had to brace itself, with very little notice, to start receiving an influx of loan applications.

According to Brock Wehry, manager of the Norfolk branch, “When the program went live on April 3, we didn’t know what to expect,” but there was “an overwhelming demand . . . a lot of volume in a short time for such a small bank.”

Wehry admits that there were major hurdles at the beginning. “There was some initial guidance from the Treasury and SBA, but there were a lot of unanswered questions,” such as whether these loans would count toward an institution’s lending limits, or how loan forgiveness would work in practice. “We were learning along with our customers,” he adds.

Iron Bank had a team of people working 10 to 12 hour a day just to get the applications in before the cap on funding was reached. The volume of activity caused the SBA website to repeatedly crash. At one point, Wehry says, the system was so overwhelmed that it took an hour so to put in one loan.

In the first round of PPP funding, Iron Bank processed over 130 applications, totaling $14 million. Wehry says these loans have helped keep hundreds of people in our area employed. He reports that even some noncustomers reached out to Iron Bank because of frustrations they had experienced in trying to work through big banks like Wells Fargo and Bank of America. Lawsuits have been filed accusing some of the larger banks of prioritizing their wealthier customers and not treating applications on a first-come, first-served basis, as the program intended.

On April 27, after a second stimulus bill was passed, a new round of PPP funding was released. This time, Wehry says, the Treasury Department had time to give greater thought about how to effectively target small businesses—and to avoid money going to larger chains like Shake Shack and Ruth’s Chris Steak House, as had happened during round 1.

The process went more smoothly this time around. The SBA website was still a little hard to deal with, Wehry reports, but it got better, and the Iron Bank team knew what to expect and was better prepared. For customers who didn’t get in during round 1, the bank had their applications ready to go into the queue as soon as additional funding was opened up. So far, Iron Bank has processed about 70 applications in this round, which is still ongoing.

Wehry says the entire process—though completely unprecedented and sometimes frustrating—has been “unbelievably gratifying.” Thanks in large part to the work of local banks, PPP has been “a vital resource in helping to keep our businesses afloat.”