The demand for Paycheck Protection Program loans may not look robust at the moment, but several lenders who spoke with the Tampa Bay Business Journal said that another round could be needed.
Demand was explosive when the Small Business Administration launched the program in April, which allows loans to be completely forgiven if a certain percentage of the funds are spent on employee-related costs. But since early May, the number of applications coming into lenders’ offices have slowed to a trickle, and it hasn’t picked up much at all since the PPP
end date was extended from June 30 to Aug. 8.
“In terms of new applications, it’s been crickets,” said Jack Barrett, president of First Citrus Bank.
Those who received a PPP loan in April were told they had eight weeks to spend it on payroll costs. That time period was later expanded to 24 weeks. But almost 18 weeks after the program frst went online, the country is still struggling to get a handle on the Covid-19 pandemic and its economic repercussions.
Last week, legislation proposed by Sens. Marco Rubio, R-Fla., and Susan Collins, R-Maine, would allow eligible businesses to apply for a second PPP loan — a move that was needed, according to several local lenders.
“There is a need for that, particularly for businesses that had to shut down a second time or businesses that have been impaired significantly by pandemic,” said Tom Zernick, president of SBA lending at First Home Bank, one of the largest providers of PPP loans in the Tampa Bay area.
The proposed legislation would tighten the restrictions on who could apply for a second loan, limiting it to businesses with fewer than 330 employees that can show at least a 50 percent reduction in gross revenues due to the pandemic.
The proposal is part of the HEALS Act, a massive legislative package that includes everything from stimulus checks for Americans to deferment on student loans. Regarding PPP, the legislation also included automatic forgiveness for all loans under $150,000 and would allow companies in bankruptcy to pursue PPP loans.
Congress has been debating the HEALS Act all summer, and it will likely be a few more weeks at least until something gets pushed through. Rita Lowman, president of Pilot Bank in Tampa and a member of the board of directors for the Florida Bankers Association, said the final bill likely would not emerge until at least mid-August.
In the meantime, eligible businesses that have not yet received a PPP loan will be able to apply for one until Aug. 8, as the first round still has about $130 billion in funds remaining. Two days after it expires, the forgiveness portion of the program begins. Even if the federal government does decide to forgive all loans under $150,000 — which represent about 70 to 80 percent of all loans provided by local lenders — banks will still have their hands full processing the forgiveness applications. And they might have to start processing a second round of PPP loans on top of that.
“We are hearing from customers that it’s needed,” said Chris Nichols, the chief strategy officer for CenterState Bank. “You can appreciate the complexity of going through forgiveness process while originating a new round. No one is looking forward to that … but I do think it is needed.”
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