Jason Follows up Regarding the Paycheck Protection Program (PPP) & the Economic Injury Disaster Loans (EIDL)
Jason returned to give us more information about the PPP (Paycheck protection Program) and EIDL (Economic Injury Disaster Loan) from the SBA (Small Business Administration). Last time he spoke to us was the first round of funding for the SBA PPP which consequently ran out of money on Wednesday April 15th leaving hundreds of businesses without funding.
The House and Senate recently approved a $484 Billion dollar expansion package to replenish the Paycheck Protection Program (PPP), which was overrun with applications. Within the $484 billion, $310 billion has been allocated to banks, with $60 billion going to smaller banks. $30 billion is going to banks and credit unions with assets between $10-$50 Billion, and the other $30 billion is going towards banks and credit unions with assets under $10 billion. The other $250 billion is essentially a free for all other banks, non-banks or credit unions allowed to make these PPP loans. The remaining money is going towards Hospitals ($75 Billion), COVID-19 Testing ($25 Billion) and EIDL (Economic Injury Disaster Loans) ($60 Billion). Within the EIDL funds, the senate has approved a $10 billion dollar grant program in which applicants can apply for up to $10,000 in grants that do not need to be paid back. With this comes many restrictions and regulations but Jason mentions that it wouldn't hurt to apply. The other $50 billion is for the EIDL loans themselves which are direct loans from the SBA. These loans need to be applied for online and have a regular loan repayment schedule.
Information from the first round of SBA loans
Jason mentions that the first round of SBA loans helped 1.6 million small businesses with almost 5,000 lenders participating. Of this, 20% were approved by smaller lenders (Under $1 billion in assets), 60% approved by middle sized lenders (less than $10 billion in assets) and no individual lender really accounted for more than 5% of the loan total. Of the loans, 74% were requests under $150,000 which Jason emphasizes as negative assumptions arise regarding the prioritization of bigger loans.
EIDL VS PPP
Questions for Jason
Q: What has changed for this second round of PPP funding ?
J: Nothing has changed, it is still the same process. Everyone still qualifies the same way. With payroll and certifications, everything that is submitted by the applicant is certified by the bar.
Tips: As the owner of a business, you have to be willing to certify the numbers you are giving. You don't want to be in a situation where the PPP loan application is incorrect. While they can’t audit all the millions of loans right now, it will still catch up to you.
Q: Do you have recommendations for small businesses who have been turned down from banks due to lack of funding?
J: Being really honest and point blank, experts expect the money to run out in 2 days. If they open the portal Friday then you need to be prepared with all your paperwork before Monday. If you are still working on your application you may have lost your chance in this round. Try and go in person as they are more likely to take your loan.
Tips: Make sure the lender you are working with is a POP Lender. (Almost all in Hawaii are). Tell them to give you honest feedback about your likelihood of getting the loan upfront and ask for the process and possibility. At this point, lenders have seen what happened in the first round and should know where you stand in this second round.
Q: Any chance of getting a loan from the Bank of Hawaii? Because they have already closed applications.
J: The bank ran out of funds and the late applicants were put in a queue. All the lenders are overwhelmed at this point. Each loan needs to be submitted into the SBA system physically. This means individuals are stuck inputting all these loans. So if they're not taking anymore it's because they feel that they cannot keep serving. You can check elsewhere. The one I heard that has been doing the best job is CPB (Central Pacific Bank). They have been doing a very good job with their clients on the PPP loans first round. I am unsure if you need to be a client ahead of time but they are being very proactive. They could be overloaded as well at this point.
Tips: The best thing would be to walk it in vs online submission. This might be hard if you're not already a client of the bank but that might be the best way to do it.
Keno: National online accounting services are processing claims from anywhere in the country.
J: Many of the online accounting services cannot access the $60 billion that was set aside for smaller banks and credit unions.
Q: What is the timeline for the EIDLoans compared to the PPP loans?
Keno: My understanding is that PPP loans will go through first and the EIDL loans will go through after.
J: That is surprising but it could be. I have heard responses that grants and loans have been approved but a lower amount than originally requested. I don't have a timeline and the only information we have been receiving is regarding the PPP Loans, there hasn't been much information around the EIDL. The SBA also won’t come out and tell you their problems, they will just keep telling you to apply.
Tips: The SBA has issued another Q&A if you have any more concerns about the loans.
One member of the treehouse applied for a PPP grant the day before they ran out of money and he was able to see the money. He is hoping it carries over to the next month.
Keno believes he has seen some money from the EIDl loan but all of the PPP grants have been pushed as too lack of funding.
Final Thoughts from Jason
It has been taking a while to process these loans as most financial institutions were not prepared to receive 1,000-2,000 loans, especially the smaller ones. He understands it's hard to be patient when you need the money but again a lot of these branch institutions were not prepared and did not have the proper systems in place for this kind of rapid loan increase. He recommends to keep applying and remain patient as lenders work their hardest to get all the loans in at this time.