Small-business leaders in the federal government and across the nation dug into the details of the $349 billion Paycheck Protection Program on Monday, April 6, in a conversation that gave clarity to the program's loan requirements, but led some panelists to criticize its initial rollout.
The Crain's webcast, titled "What the bailout means for small-business owners," was hosted by Crain's New York assistant managing editor Christine Dare-Bryan and featured five leaders from across the industry who did not entirely agree with one another's assessments on the implementation of the massive federal program.
"It's the single largest small-business loan program in history," SBA regional administrator Steve Bulger said. "It is receiving an overwhelming response so far. We know there are tens of thousands of businesses applying for these loans every hour."
“我们的资源合作伙伴希望帮助小企业navigate this process," said Constance Logan, district director of the SBA in Detroit.
Small-business community leaders in New York, while praising the intention of the program, took aim at its execution.
"I would say the rollout has been uneven at best," said Randy Peers, president of the Brooklyn Chamber of Commerce. "There's a lot of confusion, particularly from the banks and lenders themselves."
安尚的合伙人马克•Wieder房地产Group, said his clients are finding that "different lenders require different documentation."
The PPP loan program makes up to $10 million available to small-business owners, though most won't require that amount as the loan is calculated based on total monthly payroll. Businesses of between one and 500 employees are eligible, as are independent contractors and sole proprietorships. SBA officials stressed that none of them have to provide the standard documentation the administration's traditional 7(a) small-business loan program requires. The loan carries a 1% interest rate, but it can be forgiven if the money is used toward payroll expenses, health care costs, rent, mortgage cost and utilities.
"Technically, it's a loan through our 7(a) program; however, it's a completely forgivable loan," Bulger said. "It's really unique and we've never done anything like this."
With such a novel concept — and on such a massive financial scale — the parties agreed that not everything would be perfect in the early stages of the rollout.
Bulger and Logan admitted that some rules — like the $100,000 payroll cap — are interim rules and that the SBA is waiting on guidance from the Treasury and Congress on how certain loan terms apply to individual cases. They also confirmed that it is not yet clear if property owners are eligible for a loan, even though landlords are overseeing commercial and residential tenants who are eligible.
"The landlords are not going to have the cash flow and be able to pay the real estate taxes come July 1," said Wieder, noting that small landlords are not considered small-business owners under the current guidelines of the PPP.
Some panelists shared their frustration that many mom-and-pop small-business owners have reportedly been turned away from banks and local lenders even though they qualify for the loan under the SBA's general guidelines. Still, some banks have been hesitant to make loans to new customers without more thoroughly verifying their backgrounds and credit histories. Banks also face time pressures because the Treasury is pressuring institutions to provide the money to business owners within days after applying.
Peers said that in Brooklyn, he has found some banks have gravitated toward lending to their existing customers, as they've already gone through underwriting standards. In Chicago, Elliot Richardson, the president of the Small Business Advocacy Council (SBAC), said that small businesses there are incredibly confused and owners with existing bank relationships assume they will be able to get the loan before someone else, creating even more competition within the first-come, first-served program.
On this point the SBA officials at the webinar admitted they only control so much.
"It's a voluntary program," Bulger admitted. "The banks can choose if they want to partake or not. It's up to them to decide who they want to offer the loans to."
"That's a business decision for them," Logan added. "We can't make them do the loan."
Bulger said that the SBA is only requiring banks and lenders to verify payroll and benefits — any additional information is dependent on a particular lender and its own underwriting standards.
In order to navigate the differing requirements from multiple lenders, some panelists recommended small-business owners keep records of the names of their affiliated companies, lists of any co-owners, copies of income tax returns, health care benefit documentation and other financial statements.
"Don't just rely on PPP loans," Richardson said. "Talk to your banker and accountant. Are your city and state and counties offering something? Find out what your other options are."
"You really should go to talk with your advisers, that's the best thing you can do, because there's so much confusion," he said.
Pascus is a reporter for Crain's New York Business, a sister publication of Crain's Cleveland Business.