Many New Orleans-area business owners seeking federal forgivable loans will have to wait until Congress adds more money in order to apply or advance their current applications to the funding stage.
The Small Business Administration said Thursday that the $349 billion Paycheck Protection Program, which began accepting applications on April 3, has hit its funding limit and is on hold. The Trump administration has requested another $250 billion for the program.
The PPP includes eight weeks of forgivable cash flow through 100% federally guaranteed loans to cover payroll, salaries, rent, utilities and other debt obligations. Banks are in charge of processing applications with the U.S. Small Business Administration, approving loans and distributing money to customers.
Some New Orleans-area banks said they are still accepting applications, while others were considering whether to pause the process.
At Fidelity Bank, which has been helping current clients as well as non-clients secure the loans, president and CEO Chris Ferris said a decision was expected by the end of Thursday and would be announced on the bank’s website.
As of Thursday, Fidelity had received approval for 884 of 1,695 applications for a total of nearly $122 million in approved loans. A large majority of those have been funded, he said.
Ferris said that for those still waiting on applications to be approved, “We are advising them to sit tight, they are in the queue, and as soon as more funding is appropriated we will pick up where we left off.”
But with political haggling ongoing in Washington, D.C., “My concern is that there will be a long delay in refunding the program,” he said.
The Associated Press reports that the outlook for the legislation is unclear, and negotiators were unlikely to meet a potential deadline of a vote during Thursday afternoon’s pro forma session.
Other community banks said they are still accepting applications as they wait on the talks to play out.
“Yes, we will continue to accept applications. Given the importance of this SBA program to the survival of our local small businesses, we expect Congress to appropriate additional funds to the PPP loan pool, hopefully in the near future,” said Ron Samford, president and CEO of Metairie Bank.
Before the program exhausted its funding, Metairie Bank had obtained SBA approval for 322 loan applications, totaling $34.4 million in support of over 4,000 jobs. Of those applications, $15.5 million, or 45%, have been funded. Another 137 loan applications are waiting to be submitted to the SBA.
Guy Williams, president and CEO of Gulf Coast Bank & Trust, said his bank is still accepting applications as well.
Some customers of Capital One Bank, which has one of the largest market shares in Louisiana, have been unable to apply for loans due to the bank testing a new digital application process. On Thursday, the bank updated its website to say it had started accepting digital applications “in phases” and continues to do so.
Banks are encouraging applications to be submitted online rather than in a branch or over the phone.
Amid the SBA’s announcement, Greater New Orleans, Inc. moved forward with a video conference with local banking officials, attorneys and small business advisers explaining the various federal and state lending programs to business owners.
“We know the PPP program ran out of money today, and obviously we will put full-court pressure on Washington, D.C. to get the next round funded,” GNO Inc. president and CEO Michael Hecht told participants.
Chris Kane, a partner at Adams and Reese who served as a panelist on the call, said, “We expect this program to be (refunded). We feel fairly comfortable this is going to happen.”
While the forgiveness portion of the PPP is attractive, the panelists said some business owners might consider applying for an SBA Economic Disaster Injury Loan or another SBA program if they are interested in a longer-term strategy for cash preservation.
“It depends on their situation. How quickly they will be able to reopen, is there a pivot they can make, what do their finances look like right now? If they currently have a loan, can they take on an additional loan?” said Carmen Sunda, director of the LSBDC Greater New Orleans and Bayou Region, an organization providing free services to businesses needing assistance.
Businesses can apply for both the PPP and EDIL, but must make sure the loan proceeds are not used for the same purpose. The state of Louisiana also is offering a loan program for smaller businesses, although not all banks are currently participating.
For a comparison of loan programs, click here.
For additional funding options for small businesses and entrepreneurs, click here.