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The two primary federal business rescue programs have run out of money and stopped taking applications, but Vermont businesses that missed the first go-round can still better their chances of funding in case the programs are re-funded.
Get your application together, get your documentation together, and establish a relationship with a banker if you don’t already have one, Chris D’Elia, president of the Vermont Bankers Association, advised business owners.
“When the system is back up and running, the banks can begin to input those applications,” said D’Elia, adding that he believes Congress will reauthorize more money for the two programs, which were established in the days after the Covid-19 pandemic shut down businesses around the country.
“Don’t wait until Congress takes action,” said D’Elia. “Get that material together and get it in to your lender.”
It’s been clear for several days that the Paycheck Protection Program – which provides federally guaranteed loans to employers to help them with cash flow – would run out of money sometime this week. That happened on Thursday, when the PPP program stopped taking applications altogether. The program is part of the $2 trillion stimulus package Congress passed in late March as the extent of the crisis created by the new coronavirus became more clear.
D’Elia said Vermont businesses had acted quickly to capitalize on the opportunity presented by PPP; the state ranks third in the country per capita for the number of PPP loans it has received, he told the House Commerce Committee Thursday in a remote hearing.
Vermonters submitted more than 4,800 applications over a two-week period, and $853 million dollars has been allocated through the program already to Vermont businesses. Those loans, like other Small Business Administration lending programs, are administered through banks, which D’Elia said had been working overtime to process applications under new remote restrictions. That means a lot of the companies haven’t seen the money yet.
If employers who receive PPP loans maintain their payroll, and use the money to pay employees, the loans are forgiven – which essentially makes them tax-free grants. Companies can receive up to 250% of payroll from the PPP program and use it for things like rents, mortgage interest, or utilities.
Also out of money is the SBA’s Emergency Injury Disaster Loan, or EIDL, which provides grants to nonprofits and businesses of up to $10,000, usually at $1,000 per employee. The PPP and EIDL can’t be used to pay for the same business costs.
D’Elia said that banks are now moving to finish the paperwork on the loan applications they started receiving April 3. The banks only have 10 days to complete the paperwork, and he said some of his members have several hundred applications to approve, with a full processing capacity of only 100 applications per day.
He added that business owners who did receive PPP loans need to carefully document how they used the money. That will help them in 7 or 8 weeks when it’s time for the loans to be forgiven, D’Elia said.
Gov. Phil Scott on March 13 declared a state of emergency in Vermont after two cases of Covid-19 were confirmed in Vermont, opening the state to the newly authorized SBA loan programs. In a series of executive orders in the following days, he ordered the closure of non-essential businesses, putting many thousands of Vermonters out of work. While the governor has extended the state’s “stay home/stay safe” order to May 15, Regional Development Corporations, or RDCs, the state Agency of Commerce and Community Development, lawmakers and other groups are working on a longer-term recovery plan to help businesses restart their operations.
At the House Commerce Committee hearing Thursday, Adam Grinold, director of the Brattleboro Development Credit Corp. and president of the state’s RDCs, told lawmakers that while it’s critical that the federal relief programs be reauthorized, state programs such as the Vermont Training Program and Vermont Employment Growth Incentive, or VEGI, will also play a large role in helping businesses recover.
“In addition to what we are seeing in the short-term, we’ll see some longer-term impact that is going to keep hitting the economy in waves,” said Grinold. He noted that the PPP and EIDL programs did not provide meaningful benefit to companies with few employees or companies that cannot afford to reopen.
“So what we are seeing is a large group of Vermont businesses who are not going to have access to any of the federal programs aimed at assisting in stabilization and recovery,” Grinold said. He cited a Kaufman Foundation study showing that Vermont ranks in the Top 10 for creating new businesses. But those new businesses don’t necessarily yield a lot of jobs that pay well. That has been evident in the years of recovery following the recession that started around 2008.
“We’re hopeful that in addition to incentives already available to Vermont businesses, we’ll have some additional incentives that will support retention of businesses and employees,” Grinold said.
Dan Fraser, who owns the large Dan and Whit’s country store in Norwich, submitted his application for a PPP loan on Thursday through his banker. Fraser, who has about 100 employees, said the store is as busy now that it’s limited to curbside and delivery service as it was when people were able to come into the store. But he has no expectations yet about what the future might hold.
“Right now, there aren’t a lot of people in the Upper Valley who are sick, but part of me is still expecting it to get a lot worse before it gets better,” said Fraser on Thursday. “The economy is hurting for sure, and all our neighboring businesses aren’t working, so who knows how that is going to affect us?”
D’Elia is sure about this: the federal government has a lot of work to do in creating guidelines for the loans already issued. For example, he said, it’s not clear how the stimulus package can help independent contractors and sole proprietors whose business has also vanished overnight. And he said it’s unclear where the money for PPP and EIDL loan forgiveness will come from.
“When we have masses coming to the door and saying, ‘We want our loans forgiven,’ I can tell you we have no information from Treasury on how to do that,” said D’Elia. “That’s frightening for us, and it should be frightening for the businesses.”