PROVIDENCE – In a year that for many has felt like a decade, Josh Welch’s recollection of his initial application to the Paycheck Protection Program was fuzzy, at best.
Mostly what Welch remembers is the overwhelming sense of relief when he was approved for the $250,000 forgivable payroll loan, which he said was “critical” to keeping his Westerly restaurant, Bridge Restaurant River Patio, afloat. But that relief also came after a scramble of complex paperwork and anxiety that the original CARES Act funding would run out before he could claim a piece of it.
By comparison, his experience asking for more money under the latest $285 billion program included in December stimulus package was fast, smooth and uneventful. Welch submitted the application through his lender, The Washington Trust Co., and within a few days was notified he’d been approved for another $350,000 – the new program ups the maximum amount of second-round funding for food service and hospitality businesses.
Across the state and the nation, reports suggest that the Jan. 19 relaunch for all participating lenders – community development financial institutions were able to accept and approve applications a week earlier – has been much less frantic and challenging for lenders and borrowers alike. And unlike the first round, in which initial funding ran out within weeks of program launch, most are confident the funds available now will be enough to help all who need it.
As of Tuesday morning, nearly 2,700 loans totaling $240 million had been approved for Rhode Island applicants under the reopened program, according to Mark S. Hayward, district director for the Rhode Island District Office of the Small Business Administration. While that represented just a fraction of the $1.9 billion distributed across 18,000 state businesses when the program ended in August, Hayward was optimistic the latest funding round would eventually reach those numbers again.
Much of the complexity and uncertainty surrounding the program has been eliminated, with simplified applications and clearer guidance for lenders. For borrowers, particularly those seeking a “second draw,” the process is also quicker and easier.
So far, a majority of applicants to local lenders have been second-time-around borrowers, which means their information is already in the system, said William K. Wray Sr., senior executive vice president and chief risk officer for Washington Trust Co.
Also aiding the process is that there are fewer applications flooding in at once.
Wray declined to share exact numbers of applications received by Washington Trust, but projected based upon the “brisk” but “steady” pace that the bank would not see the same volume it did in the first round of 2020.
Pawtucket Credit Union President and CEO George J. Charette estimated application volume was down 40% compared to the first week of the program launch last year. Citizens Bank – the top PPP lender in Rhode Island in the prior program iteration – also saw a trail-off in applications after a “hectic” first two days, though the Rhode Island-based regional bank continues to see about 1,000 applications a day, according to Jack Murphy, president of Citizens Business Banking
Additionally, lenders have really honed their process compared to the first time, ramping up technology and training employees such that what was an unfamiliar process now feels like second-nature, Murphy said.
“Even if we had that same volume to handle [this time] our systems are just working much better this time around,” he said.
Washington Trust was also seeing benefits from a streamlined application process, having replaced their initial methods – which included receiving applications via email, fax and even paper documents – with an online portal that allows borrowers to input information instantaneously and in a consistent format, Wray said.
“You always learn from the first time around, and we definitely did that,” he said. “The out-of-the-gate process just has so much less friction this time.”
Hayward admitted there were a few “hiccups” with the SBA’s system this go-round, namely because the SBA has put additional layers of protection into its approval process in order to protect against the fraud and findings that ineligible borrowers received funding in the first program distribution.
That the SBA is no longer putting out new guidance or interim rules on a nearly-daily basis – changing programs with each update – also lessens the “volatility” for lenders trying to keep tabs on the rules, Wray said.
However, new restrictions – including that second-draw borrowers must show a 25% drop in revenue or income from 2019 to 2020 – have created new challenges for some.
Hayward said many of the questions his office has fielded from businesses center around these new requirements, which in some cases may make even those approved for loans last year ineligible for more money.
Charette echoed this sentiment, noting that many of the previous borrowers who received loans through his credit union were either not applying or still sending in the paperwork only to be found ineligible because of the new revenue loss requirements.
That was not a problem for Welch, who estimated a 50% loss in income in 2020 for his restaurant amid the off-again on-again opening schedule. Amid surging case counts and diminished interest in indoor dining, Welch and his co-owner in December decided to shutter the restaurant once again, keeping kitchen staff working on a new menu with hopes of reopening for takeout soon, and indoor dining at an undetermined date.
The additional payroll loan will once again be an integral part of his 10-year business’ ability to survive a second wave of COVID-19 cases – paying the landlord, the vendors and most importantly, the staff, which reaches 80 people during peak summer season, he said.
Eligible businesses have until March 31 to apply for the latest round of funding. As of Jan. 19, the most recent update from the SBA which was before the program opened to all lenders, over $5 billion was distributed across 60,000 businesses.
Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com.
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