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Federally-Backed & Local Loans Aim to Support Small Business in Crisis
By Stephen Dravis, iBerkshires Staff
04:01AM / Friday, April 10, 2020
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PITTSFIELD, Mass. — As small businesses confront what some analysts already have called the worst financial crisis since the Great Depression, the phones of a small-business adviser have been relatively quiet.
 
"The main contact we're getting is through email," Keith Girouard said this week. "That is a lot more effective and efficient for us.
 
"We're working through phone and Zoom [video conferencing] as well. But the phone is not ringing off the hook. The emails are ringing off the hook."
 
Girouard is the Berkshire regional director of the Massachusetts Small Business Development Center Network. He operates one of five such centers across the commonwealth and a thousand in the United States and its territories.
 
"What we do is provide assistance," he said in a telephone interview. "Our services are free and confidential."
 
And these days, a fair amount of those services involve advising business owners on loan programs administered by the Small Business Administration, including a new product created specifically to address the economic effects of the COVID-19 pandemic.
 
One feature of the Coronavirus Aid, Relief, and Economic Security (CARES) Act is the Paycheck Protection Program.
 
The widely publicized PPP is a loan offered through banks and credit unions that features a 1 percent interest rate, payments deferred for up to six months and loan forgiveness, "based on the employer maintaining or quickly rehiring employees and maintaining salary levels," according to the SBA website.
 
As favorable as those terms are, Girouard is advising that businesses don't put all their eggs in one basket but instead consider several SBA products in addition to the PPP.
 
The administration's Economic Injury Disaster Loans offer terms of up to 30 years at interest rates of 3.75 percent for for-profit businesses and 2.75 percent for non-profits. Businesses can borrow up to $2 million.
 
Girouard said the EIDL is an existing SBA program that has been adapted for the COVID-19 crisis, and the roll out had some issues.
 
"For people who jumped on in the beginning — they had just adapted a program they had for natural disasters," he said. "The magnitude, the volume of people coming through the system is huge, and also it's an economic disaster.
 
"The feedback we're getting from clients is that in the first iteration or second iteration, they didn't know how to answer the questions [on the application] because it was more geared to the natural disasters. Now, it's much more clear. The changes have happened very quickly to get it in tune."
 
Girouard said the application process online takes about 45 minutes. The turnaround for the EIDL typically is about three to four weeks, but it also offers advances of up to $10,000 to help get funds more quickly into the hands of businesses.
 
"The PPP is meant to work with the EIDL in the sense that with part of the money you get from the PPP, you can pay off the EIDL," Girouard said. "The reason that's interesting is that as exciting as 3.75% interest is on the EIDL, it's 1 percent interest on the PPP. You can exchange it for 1 percent interest, which is outstanding. That's why we try to get people to look beyond just the PPP."
 
A third option Girouard is advising is the SBA's Express Bridge Loan, which can allow small businesses "who currently have a business relationship with an SBA Express Lender" to acquire up to $25,000 in "two weeks or less," he said.
 
Most local financial institutions are offering Small Business Administration loans, and many have links to online applications prominently displayed on their web pages.
 
At Adams Community Bank, they are advising customers to talk to a loan officer before hitting the button on an application.
 
"We prefer them to call first so we can make sure they're using the right application and they know the documentation so when we do submit it, it's ready to go," said Maureen Baran, the bank's senior vice president for retail lending. "I think that's why we have some approvals already, because we set our customers up for success."
 
Baran said on Wednesday that Adams Community Bank already had processed 100 applications for PPP loans since the SBA finalized the application process late last week.
 
"We have a good team that kept track of it closely and was ready to launch it," she said. "We have some approvals out of the 100. It's now waiting for direction from SBA on the closing requirements, what documents need to be signed. Our commercial team is on a conference call with SBA [Wednesday] morning to start closing all those as soon as possible."
 
Local banks are doing what they can to help businesses outside the SBA process as well. Mountain One Bank is offering a commercial loan payment deferral program. Adams Community created a $500,000 local Small Business Assistance Loan Fund and customers can borrow up to $25,000 at 3.99 percent with interest-only payments in the first six months.
 
"We've had some really good activity in the Small Business Assistance Loan Fund," Baran said. "Not all businesses fit perfectly into what the Small Business Administration offers. This is basically a discounted interest rate loan to help people through this.
 
"We still have funds available for our customers, and there are a number of applications in process right now."
 
Baran said there are small businesses in the area that may not find the Paycheck Protection Program works for them.
 
"Restaurants probably are a good example," she said. "Part of the PPP does require the money to be used within a certain period of time after the note is signed. Not knowing when you can reopen a business — whether a restaurant or other non-essential business is a difficult thing.
 
"The requirements are that you have to use 75 percent of the money taken under PPP for payroll to qualify for forgiveness of the loan. And people don't know if they'll have their staff back in that period of time, so they're leery."
 
That concern has been raised by the Massachusetts Restaurant Association.
 
On its website, the trade group notes on its website that, "For some operators, it might not make sense to take employees off UI because they will not be in operation. Our industry will most likely need a ramp up period back to capacity. It might make more sense for operators to use that money in 5-8 weeks, which is currently not permitted."
 
The MRA also says it is working with the Massachusetts congressional delegation and SBA administrators to address the concerns of its members.
 
The Massachusetts Small Business Development Center's Girouard said he had no first-hand information about any special concerns relative to the restaurant trade but emphasized that there are a variety of loan options aside from the PPP.
 
"I have and will continue to suggest to our hospitality and restaurant clients that they review the eligibility criteria for both the EIDL and the PPP, and if they qualify, they should apply — and do it soon," he said.
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