The loan is designed to be forgiven for small businesses that are able to retain their workforce by the end of the loan period. It is also set up to encourage those businesses to bring back employees who were temporarily laid off as a result of the pandemic.
Small businesses who apply can receive a maximum loan of two and a half times more than their average monthly payroll reported in 2019. While the majority is to be used for payroll expenses, businesses can use a portion of it to cover costs such as rent or mortgage payments during the loan period.
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The program was approved by congress late last month as part of a $2.2 trillion relief package signed by President Trump. The application process for the program opened up earlier this month and it is currently funded for up to $350 billion.
However, there has been a high demand for those loans and banks have received an unprecedented number of applications. As of Tuesday afternoon, more than 1 million of those loans have been approved, representing nearly $248 billion from the Paycheck Protection Program.
However, congress is negotiating another $250 billion for the program, an amount for which banks are lobbying.
Some banks have issued warnings to customers that current funds for the program are quickly running out.
“The later an application is submitted, the more likely it is that the application will not be processed and registered with the SBA before PPP funding runs out,” said a statement on PNC Bank’s website Wednesday afternoon. “As a result, successful SBA registration of applications submitted to PNC on or after April 15th is unlikely, at this time.”
However, in Clark County, banks have reported that hundreds of applications have already been approved with some businesses already receiving the loan.
Representatives of New Carlisle Federal Savings Bank said they have received over 100 applications and have given out a total of $10 million in those loans as of Wednesday afternoon.
Andy Cason, with Cason Roofing, said he received the loan from that bank on Friday. He had previously laid off nine employees as a result of the immediate economic impact caused by the COVID-19 pandemic. However, he has since brought them back and now has a total of 12 employees.
However, the pandemic has interfered with seasonal hiring. Cason said he would usually have up to 22 workers as the weather begins to warm and the demand for his services increase. He added that the loan would also help with costs associated with the health insurance of his employees.
Shawn Bowshier, with Ride 1 Powersports, said his business has had to reduce its hours of operation and previously had to layoff eight employees. However, he said the loan has allowed him to hire back five so far.
Bowshier said the goal is to get his staff back up to 18 people, with 15 currently working. He said normally they would start to hire additional employees around this time, but that has been put on hold.
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Brian Smith, the president and CEO of New Carlisle Federal Savings, said his bank started completing applications towards the beginning of last week.
Some banks noticed having access problems in terms of getting information out to the SBA during the beginning of the program due to an overwhelming amount of applications received.
Smith said the loan is much different than most. Businesses need to provide proof of payroll information and do not need to go through other steps usually associated with the loan process.
The approval process for those loans has also been sped up and in some cases are approved within the same day, Smith said. He also noted that other SBA loans could take several months to be approved.
Though some banks have moved forward with funding, others have delayed the closing process as they were awaiting more guidance from the SBA. Those banks expect to start getting that money out as early as next week, said John Brown, the president of Security National Bank.
He said that final guidance was not released by the SBA until Monday.
Brown said that the SBA was releasing constant updates last week regarding the program. He said in some cases that information was contradictory as those details were being ironed out.
However, it is up to individual banks in terms of closing those loans once receiving approval from the SBA.
Brown said they have already approved a year’s worth of loan activity in a matter of a week. He said his employees have been working to get as many of the loans approved before funding runs out.
Once the SBA approves the loan, that money is earmarked for that business, Brown said.
Brown said his bank is working on designing a closing process that ensures SBA compliance, while making sure that process can be done by both employees and customers through electronic means.
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