Paycheck Protection Program loans preserve more than 4,200 Chatham jobs

Posted 7/31/20

Without a Paycheck Protection Program loan, Chatham Habitat for Humanity wouldn’t have been able to afford building families affordable homes.

“The money allowed us to continue to pay people …

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Paycheck Protection Program loans preserve more than 4,200 Chatham jobs

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Without a Paycheck Protection Program loan, Chatham Habitat for Humanity wouldn’t have been able to afford building families affordable homes.

“The money allowed us to continue to pay people to build those houses,” said Executive Director Jerry Whortan. “If we hadn’t had the PPP money, we would have shut down the whole organization, and there would have been several families just out in the cold.”

Chatham Habitat is one of more than 540 Chatham County small businesses and nonprofits that received federal PPP loans, according to data released by the Small Business Administration and U.S. Treasury earlier this month. This loan program — established by Congress in late March — offers small businesses forgivable loans of up to $10 million to help owners retain their employees and weather the pandemic’s economic fallout.

An analysis of the data shows these loans — which ranged from $300 to $2 million — helped Chatham businesses save more than 4,200 jobs between April and July.

Jon Spoon, the director of Central Carolina Community College’s Small Business Center, called the numbers “encouraging” and said they show that the PPP was an “important lifeline” for Chatham County’s small businesses.

“People really have deep connections with their employees and want to make sure that their lives are OK,” he said. “The program did help (with) that, and I think taking the pressure of payroll off of people’s mind for at least a month or six weeks really, really helped the businesses.”

Statewide, banks approved nearly 122,000 PPP loans totaling about $12.4 billion, which helped North Carolina businesses retain around 1.2 million jobs between April and June. Nationally, lenders have approved over 5 million loans worth more than $519 billion, as of July 26.

Most Chatham businesses received less than $150,000, but a little more than 60 businesses — which federal data identifies by name — received loans between $150,000 and $2 million. Federal data does not specify how much money these businesses received, only a range.

The data didn’t provide company names for recipients of PPP loans under $150,000, but it does include specific loan amounts, businesses’ ZIP codes and cities, industry type and the jobs retained. An analysis shows lenders approved these Chatham businesses for nearly $16 million in PPP loans under $150,000.

Dropping sales, diminishing demand and growing uncertainty prompted Bold Construction owner Chris Ehrenfeld to apply for a PPP loan in April. The money he received from that loan — which fell between $150,000 and $350,000 — helped him retain about 18 employees.

“The PPP money definitely made it such that we didn’t have to lay people off,” said Ehrenfeld, a partner in Chatham Media Group, which owns the News + Record. “Without it, we most definitely would have had to lay people off.”

The News + Record received a PPP loan of less than $150,000.

Loan data and forgiveness

The data reflects what borrowers reported, according to the PPP fact sheet published with the data, and some media outlets like CNBC have reported the data contains errors. Some business owners contacted said they never accepted a PPP loan even though the data identifies them as recipients. Other information is missing or incomplete. Some entries do not specify how many jobs borrowers saved, and many others report zero jobs retained.

That’s because this data is preliminary, said Thomas Stith III, the SBA’s North Carolina district director.

“What we’re seeing now with the preliminary numbers is that people — and understandably so — quickly applied for the funds,” he said, adding the SBA will start receiving more accurate numbers once businesses apply for loan forgiveness.

Other businesses, he said, may have also underreported how many jobs they retained because they were still rehiring people.

“They may not have known what their actual number was going to be (for loan) forgiveness,” Stith told the Chatham News + Record in a phone interview on July 20. “They knew they were going to maximize the payroll component of the Paycheck Protection Program but may not have had full information themselves at that time.”

Securing loan forgiveness is the next step for many businesses, and some owners are ready to apply now.

“We spent the money,” Ehrenfeld said. “We have documentation. We have the application ready to go, but the bank tells us we need to wait until their loan forgiveness portal opens up, and that has not occurred yet.”

According to several lenders and banking associations, much about the loan forgiveness process still remains up in the air.

Changing rules and new guidance have since changed the PPP’s original loan forgiveness terms. Originally, PPP recipients had to spend at least 75% of their money on payroll expenses within eight weeks of receiving their loans to secure forgiveness.

But on June 5, President Donald Trump signed into law the Paycheck Protection Flexibility Act of 2020, which pushed the original June 30 deadline to rehire workers back to Dec. 31 and allowed loan recipients 24 weeks to expend their funds.

The law also lowered the loan forgiveness threshold: Businesses now only have to spend 60% of their loans on payroll expenses to achieve full forgiveness — as long as they rehire all of their full-time workers at no less than 75% of their pre-pandemic pay before filing for forgiveness.

Though the loan forgiveness applications are out and guidance issued, the SBA signaled last week that they will not begin accepting applications until Aug. 10, the day their loan forgiveness application portal – or PPP Forgiveness Platform – is scheduled to go live.

But that’s not set in stone, according to Fidelity Bank’s Chief Credit Officer Matt King.

“There is legislation in the works that impacts the PPP,” he told the Chatham News + Record. “It is possible the date and process could change.”

One such Senate bill — sponsored by North Carolina Sen. Thom Tillis and several others — proposes to grant automatic forgiveness to small businesses that took out loans less than $150,000.

That would cover about 86% of all loans made through the PPP, said Peter Gwaltney, president and CEO of the North Carolina Bankers Association. This bill, he added, would make it easier for small businesses to apply for and receive loan forgiveness.

“It would also make it easier for the banks to forgive those (smaller loans) and spend their time on the larger loans that require more care and attention,” he said.

King said he supported the bill and thought it was the right thing to do.

“That would be a very large help to the banking industry that really administered the program and I think a big help to a lot of customers to not have to go through that exhaustive application process to get what in some cases could be a $3,500 loan forgiven,” he said. “I’m hoping that they’ll get that done.”

Right now, he said, there are two forgiveness application forms — the long-form version and the EZ application. The EZ version is shorter and more streamlined, he said, and only certain businesses can fill it out.

“The EZ version is for those folks that did not have more than a 25% reduction in payroll,” King said. “They can use the EZ application to apply for forgiveness. For those that did have a reduction in payroll, they would need to use the regular application to apply for forgiveness.”

But even the EZ version, King said, contains multiple pages and requirements whereas the automatic forgiveness Tillis’ bill proposes would truly be “a one-pager.”

“You sign a certification, and you’re done, and I think that’s the difference,” he said. “Even on the EZ app, you still have to gather things together to submit versus this simplified process would truly just be, ‘Sign one document. Don’t worry about anything else. You’re done.’”

It’s similar to a process the IRS already uses for taxpayers who don’t have a lot of federal income tax deductions, Gwaltney said: Taxpayers attest to certain things, sign their names under penalty of perjury, submit the forms and pay their taxes. It’d be the same for borrowers, he said.

“And then if there’s an irregularity or a problem down the road, the Small Business Administration can always come back and audit that borrower,” he said. “So we’re not saying, ‘Turn in the form, and you’re scot-free.’ We’re saying, ‘Let’s go with a process we already know that the IRS uses.’”

‘It’s a good start’

Small businesses and nonprofits have until Aug. 8 — as of right now — to apply for a PPP loan, and according to Stith, the SBA’s North Carolina district director, more than $130 billion remains in the program.

Some of that money, Stith said, will probably be left over, and the SBA, Congress and the Treasury are working together to determine the next steps.

“While it’s been a significant response, there’s also a significant need,” he said, adding, “We anticipate potential for additional relief, just not at this point. That type of policy is being debated and reviewed now.”

Such relief could mean more long-term assistance, he said, pointing to several legislative initiatives pending in Congress.

One proposes to extend the current August deadline, while he said another proposes transforming the PPP into a “more targeted initiative,” like extending a second loan to PPP loan recipients that show additional revenue loss.

Many small business owners, nonprofits and consultants said additional, long-term aid would go a long way toward helping businesses recover.

While the PPP money has helped meet businesses’ immediate needs, Cindy Poindexter, president of the Chatham Chamber of Commerce, said going forward is a “different question.”

“Nobody really knows exactly what it’s going to be like tomorrow (or in) the next couple of weeks,” she said. “And once you start paying loans back and you’re still kind of struggling, you’re still going to be in a predicament there.”

The PPP was a “quick lifesaver designed to last for two months,” CCCC’s Spoon said.

To ensure they received forgiveness, many early PPP recipients spent their money within the required eight weeks. But now, several months into the crisis, business isn’t quite back to normal: Many businesses continue to struggle under restrictions meant to safeguard public health, while others — like gyms, bars and movie theaters — have been forced to remain closed.

“It’s a good start,” Spoon said. “But it’s just a really hard challenge to get your hands around because people don’t know exactly how long it’s going to last or what the next steps in the phases are.”

Whortan said Chatham Habitat — and its employees — can’t afford another shutdown.

“To date, what we got was fine,” he said. “It was great and it worked well for us. My concern is (for) October (or) November if this thing goes haywire again, then we’re going to have to look for some help.”

Starrlight Mead’s owner, Becky Starr, received her PPP loan back in April and spent around three-quarters of it on payroll. It’s worked a little too well: She said she was paying employees for more hours than they actually worked.

“We’re a retail business primarily,” she said. “I was paying people to stay home, and they can’t work from home. They were doing some things like generating content for our website and social media and stuff for me.”

Since then, Starr said business has been picking up, but she still has several “huge concerns” — and extending or reconfiguring the PPP won’t help solve them.

Her six-month deferment on her mortgage payment ends in September, and the pandemic has left her wondering whether she’ll have the revenue to pay it off. She’s already had to cancel an on-site festival scheduled for September and wonders whether other cancellations will follow.

“I have no idea what holiday time is going to look like this year because families can’t get together,” Starr said. “Are people going to go out and spend money? I’ve got a holiday party on the books for a local group that I don’t know if they’re going to hold.”

With businesses facing such uncertainties, Poindexter said more long-term funding will probably be needed.

“It’s not going to be a quick fix,” she said. “It’s gonna take a while for everybody I think to get back on their feet.”

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