The U.S. Small Business Administration began rolling out a new round of paycheck protection loans on Monday, which will give exclusive access to funds this week to small Arkansas businesses that have not previously borrowed from the initiative.
Arkansas community bankers worked all day preparing loan applications on behalf of first-time borrowers who can apply for up to $ 2 million in forgivable loans.
Community financial institutions such as Farmers Bank and Trust Co. of Blytheville will have priority in submitting loan applications through at least Wednesday, under the rules the SBA put in place starting Friday and throughout the weekend.
“We’re not expecting the same volume as we did last year, and I don’t think it will be as urgent as it was then,” said Randy Scott, President and CEO of Farmers Bank, on Monday.
In the first few days of the first round of funding, only community finance institutions, community development finance institutions, and micro-lenders are allowed to submit loans. SBA officials estimate that there are approximately 18 lenders in Arkansas who are qualified to participate under the exclusivity rules.
The federal agency, which has $ 284 billion in lending, is targeting small businesses that struggled to get credit when the Paycheck Protection program was first launched last year. SBA hopes to reach groups that include underserved, minority, veteran, rural and women-run businesses.
“We’re giving priority access to smaller businesses that may not have access to [Paycheck Protection Program] Loans during first drawing (last year), “said Edward Haddock, director of the SBA in the state of Arkansas, on Monday morning as the paycheck protection program opened.
“This is really a mission to reach underserved borrowers and hard-to-reach communities,” he said. “Community financial institutions really are the gatekeepers for many of these underserved borrowers.”
In addition, the first round of funding was expanded to include 501 (c) (6) organizations such as chambers of commerce and trade associations, as well as housing associations, television networks and newspapers, and destination marketing organizations such as the Little Rock Convention & Visitors Bureau. The program expires on March 31, or when the $ 284 billion is used up, whichever comes first.
This new round of funding for the Paycheck Protection Program, approved by Congress in December as part of a wider stimulus package to fight the coronavirus, also allows borrowers to cover additional expenses such as operating costs, property damage, supplier costs and personal protective equipment. Funding in 2020 was generally limited to wage, rental or mortgage expenses and operating costs.
The SBA rules introduced over the weekend give municipal lenders the first opportunities to extend loans for first-time borrowers to this day.
As of Wednesday, the same community-based lenders have the exclusive right to lend to a limited number of companies that borrowed from the paycheck protection program last year. Only companies with fewer than 300 employees that have experienced a 25% decline in revenue can apply for a second loan under the Paycheck Protection Program under the SBA rules.
The aim is “to give smaller, severely affected companies a second bite of the apple,” said Haddock on Monday.
Last year, companies with fewer than 500 employees had loans of up to $ 10 million available.
There is still no timeline for when traditional lenders can file applications for borrowers, although SBA officials said funds should be available for anyone who needs them.
“We think there are enough resources to prevent panic,” said Haddock. “We will continue to serve borrowers until this program has fully exhausted its resources.”
Under the SBA rules, only lenders can apply for Paycheck Protection Loans on behalf of their small business owners. Firms apply to lenders who ensure that these firms qualify for the program and then submit the applications to the SBA.
Last year, companies and banks rushed to apply for Paycheck Protection Program loans when the program opened, generating an overwhelming number of requests that choked and closed the loan portal. The initial $ 349 billion Congress approved for the program was gone within weeks.
Bankers forecast a less hectic approach this year.
Farmers Bank, which primarily serves Mississippi County, had about 200 loan applications in its first week of funding last spring. Scott said he expected maybe 50 inquiries this week.
“The first time everyone was scared the program was running out of money and tried to beat others to apply,” he said.
“This time around, it seems like companies are more confident that money is available and not as urgent to get inquiries,” added Scott. “There was a lot of fear in the first round. This time the process should be a lot easier for borrowers and banks.”
Last year, Farmers Bank made 256 Paycheck Protection Program loans worth $ 245 million.
More than priority access, the community lenders will benefit most as the SBA has set aside $ 15 billion for its exclusive use in making loans under the Paycheck Protection Program, Arkansas bankers said.
Arkansas Capital Corp. has priority access even when the program opens, but President and Chief Operating Officer Sam Walls said the Little Rock organization wants to make sure it understands lending rules before filing applications. “We’ll be there as soon as possible, but we want to make sure we’re doing it responsibly,” he said.
However, Walls noted that the decision to make $ 15 billion of the $ 284 billion in the program available for exclusive use by municipal lending institutions is more beneficial than having exclusive access in the first few days of the program.
“Handling of financing for CDFIs [community development financial institutions] is more important in my opinion than having priority access at the beginning of the program, “said Walls.” The bigger bonus for us will be that this separate pool of funds is available. “
Generations Bank of Rogers initially thought it would qualify as a municipal lender, with a priority of starting lending now, but the bank learned Monday morning that it was not on the eligibility list.
Still, Chief Lending Officer Luke Colley said the bank was confident it would be able to serve small business customers once the program is open to all financial institutions.
Last year, Generations made 433 loans for the paycheck protection program for $ 28.3 million. The volume of Colley projects will not be that big this time.
“I don’t think we will have the same run as last year,” he said. “We won’t have nearly the same volume as before. But I assume that the companies that need it most will apply this time.”
In 2020, Arkansas banks submitted 43,669 paycheck protection program loan applications valued at $ 3.3 billion.