Security State Bank in Chehalis has processed more than 300 Paycheck Protection Program (PPP) loans, ranging from $1,100 up to $2 million, causing credit officers to work overtime to navigate through the program’s guidelines, said Andy Alexander, a senior credit officer with Security State Bank.
It’s a task made more difficult since those rules have been changed or adjusted by the Small Business Administration (SBA) several times. Now, with millions of dollars loaned locally to help small businesses float through the COVID-19-caused financial crisis, Alexander and others say applying for loan forgiveness is their new concern.
“There were a lot of questions and a lot of grey area. The guidance was clumsy at best and so people were calling us asking what they should do and we didn’t know because the guidance could change tomorrow, and it did,” Alexander said. “But if we did everything in good faith and carried out the mission of the SBA then presumably these loans are 100 percent guaranteed.”
Alexander said that the average business owner would have difficulty navigating the U.S. Small Business Administration website and the guidelines for how to apply for the PPP loan.
“The banks are typically trying to push business owners to the paid professionals, such as CPAs because the banks have so many loans that they’re not able to help businesses all the way through the process,” he said.
Alexander said that keeping up with the guidelines and rules of the PPP loan has been challenging and the applications for loans and the applications for loan forgiveness have not always been consistent. He provided one example — a loan application asked for the number of employees and the loan forgiveness application asked for the number of FTE (full-time equivalent) employees — so if any of the initially reported employees were part-time the numbers would not align.
Although the PPP loans were created by the federal government in response to the COVID-19 outbreak and subsequent business closures, the PPP loans are funded through individual banks’ capital, Alexander said.
“Banks are worried about the forgiveness side of things. If it took us an hour to do the original loan, it’ll take us three hours to do the forgiveness and it’ll be months before we see our money coming back,” he said.
Another issue Alexander sees local small businesses face is the inability to pay rent on the building or space where their business is located because 75 percent of the total PPP loan amount must go toward payroll, leaving only 25 percent to assist with the other expenses of keeping the business afloat.
“If businesses can’t pay their rent then there’s not going to be a job for employees to come back to,” said Alexander.
TwinStar Credit union assisted 67 businesses in Lewis County with a Paycheck Protection Program loan.
"A total of $2,713,547 was provided to help support these businesses and their employees through the financial impacts caused by the COVID-19 crisis," said Chris Heck vice president of business services.
Otto Rabe, director of operations at Mountain View CPAs, tax and accounting services, in Chehalis said that their accounting firm has assisted about 30 businesses with their PPP loans and said that many clients have expressed concern about the loan forgiveness process. Rabe said that as of now the PPP loans have been successful and as long as businesses follow the guidelines and use 75 percent of the loan toward payroll then the business should be eligible for forgiveness. Businesses have 24 months to repay the PPP loan and the payments with one percent interest begin 6 months after the issuance of the loan, Rabe said.
“As an emergency effort, I don’t know that they had a lot of time to deliberate on how to execute this so as a result there’s been a lot of updating to the guidance provided. So at the very beginning, there wasn’t a ton of guidance on (loan) forgiveness,” he said. “It’s been frustrating for a lot of people.”
Washington Federal Bank, the largest bank headquartered in the state, with a branch in Centralia has administered 2,100 PPP loans out of the 80 branches that operate all over Washington totaling $405 million. Brad Goode, marketing and communications coordinator with Washington Federal Bank said that the average single PPP loan amount was about $127,000.
“With the average loan amount at $127,000 that tells me that this money is truly going to small businesses. I’m very proud that we are helping out the mom and pop, small community businesses that really need this help to keep paying their employees,” said Goode.
Washington Federal Bank has been assisting clients and nonclients with the PPP loans and recently held a “PPP Loan Forgiveness” webinar to help answer questions people had about PPP loans which was virtually attended by over 6,000 people and fielded 1,600 questions. The webinar is still available at www.wafdbank.com/ along with a list of frequently asked questions.