Small biz urged to apply for SBA loan programs Congress, White House working to add funds to PPP, EIDL

By Evan Chadwick
©2020 Telegraph Publishing LLC

With the Covid-19 health crisis continuing to cause large scale shutdowns of small businesses across Vermont, small town businesses have been compelled to collaborate more than ever before in an effort to seek emergency funding that has been rolled out as part of the federal CARES Act signed into law on March 27.

The $350 billion program had offered small business financing through the Paycheck Protection Program, the Economic Injury Disaster Loan program and bridge loans rolled rolled out by the Small Business Association, as part of a larger $2 trillion federal stimulus. The need for the SBA loans have overwhelmed business advisory agencies with inquiries as businesses seek advice on what working capital may best fit their needs.

Then on Thursday, the SBA announced that it is unable to accept new applications for both programs “based on available appropriations funding.” It continued: “Applicants who have already submitted their applications will continue to be processed on a first-come, first-served basis.”

Still, Bob Flint, executive director of the Springfield Regional Development Corp., urged business owners to “talk to us for advice – and they should keep an eye on events in D.C.” He continued, “If PPP makes sense for them,” they should talk to their bank and still fill out the forms.

Then on Sunday, according to the Washington Post, Congress and the White House were nearing an agreement on funding the small business aid programs.

According to Flint, the SDRC is “Covid-19 all the time.”  The SDRC, which serves towns in Southern Windsor County, has been consulting with area business owners as they seek to find stop-gaps for their sudden loss in cash flow. “There is a substantial amount of interest as well as confusion,” said Flint.

The confusion, according to local banks and business owners, comes with how quickly the SBA sought to roll out the lending process and the difficulty of doing so when so much money was made available in so little time.

Business owners should ‘talk to us for advice – and they should keep an eye on events in D.C.’

Bob Flint
Springfield Regional Development Corp.

“The government wanted to roll these programs out to the community as quickly as possible, so much-needed funds could get into the hands of small business owners,” said Carrie Allen, senior vice president of Marketing and Business Development for Heritage Family Credit Union. “That meant that the process from application through funding wasn’t fully formed at the time it was announced, therefore we’ve been receiving guidance in an evolving fashion.”

The evolution of that guidance has become even murkier with the April 16 announcement that the SBA would not be accepting any more PPP applications. The SBA reported that it had approved more than 1.6 million applications, accounting for more than $339 billion of the $349 billion that had been allocated. Currently, despite there being reports of lawmakers increasing the funding, no timeline has been given on when the application process will open up again. “We have heard that Congress is working on additional funding but it’s in the government’s hands at this point,” said Allen.

A local inn struggles to secure Paycheck Protection funds

Even for those who have submitted their loan applications, the evolving nature of the loan process has caused local business owners to struggle in navigating the application process, which had been refined several times in its first few weeks.

“We tried to apply the day that the U.S. House approved the bill,” says Penny Cote, who, with her husband Dan, owns the Inn Victoria in Chester. “We filled out three applications for the PPP loan and, although they said we have been approved, we have not seen any of the funds.”

Cote stated that after the news broke that the SBA was not taking any more PPP applications, she confirmed with her banker that the inn’s loan would still be funded. “Anyone whose loan has been approved by SBA will receive funding within 10 days of their loan approval,” says Heritage Credit Union’s Carrie Allen.

Cote, who had to lay off her two full-time employees when Gov. Scott issued his executive order to shut down all non-essential business, which included the closure of all inns and hotels, also has concerns about whether her employees will be able to return even when her inn is given the OK to reopen.

“Nothing has been easy,” says Cote. “Banks have been good at deferring payments to keep our heads above water, but we lost a lot of reservations. Everything is up in the air right now.”

Cote’s concern is one that is shared by Flint, who has been wrestling with the “what ifs” being voiced by business owners who are confused about the forgiveness provisions of the PPP. “What is fuzzy is whether PPP loans will be forgiven when businesses partially shut down,” says Flint. If an employee chooses not to return due to receiving unemployment benefits that exceed their normal pay, what part of the PPP loan will be forgiven?”

What does forgiveness mean?

The Chester Telegraph was able to view one of the recently issued Promissory Notes that outline the terms of the PPP.

Although the note references that the debtor can apply for loan forgiveness, the terms of the note itself are rigid, providing for a repayment period of two years. In the note reviewed by The Telegraph, the two-year repayment amounted to monthly payments that exceeded $5,000 on a loan of just over $100,000.

The note further provided for late penalties of up to 5 percent of the payment owed and a default penalty that would increase interest by 4 percent. “Our advice — because we have not seen the other side of this program looks like — is to view all of these loans as debt,” says Debra Boudrieau, area business advisor for the Vermont Small Business Development Center. “If some of these loans are forgiven, that’s fabulous, but that provision is contingent on whether good records are kept on what the PPP funds were spent on.”

According to the language inside the CARES Act loan forgiveness shall be considered “in an amount equal to the cost of maintaining payroll continuity during the covered period.” If business owners can’t properly account for these expenses or if they use PPP funds for expenses outside the intent of the act, they could be at  risk of assuming a loan that is more than their business can legitimately handle.

“We don’t want business owners making reckless decisions,” says Flint. “It is critical to take a pause and look before you sign. It is not as simple as signing for free money.”

Cote, whose inn had been off to a great start in 2020 before the shutdown, hopes that the loans she is able to secure will allow her and her husband to reopen as soon as possible. But Cote sees the troubles that other business owners may have in securing the same financing if their records are less than immaculate. “If you’re not a good record keeper, this loan process could be a really dangerous thing.”