Arkansas SBA office opens application portal for second round of Paycheck Protection Program
January 18-24, 2021
The U.S. Small Business Administration, in conjunction with the U.S. Treasury Department, re-opened the second round of the Paycheck Protection Program (PPP) funding without much fanfare on Jan. 11, nearly two weeks after Congress approved the $908 billion the stimulus package.
In response to criticism that the earlier CARES Act programs left out black and minority-owned businesses, the latest version known as PPP2 includes $12 billion in appropriations that will go to mission-based Minority Depository Institutions and Community Development Financial Institutions, which make up nearly 10% of all PPP participating lenders in 2020. CDFIs have a federal mandate to provide affordable lending to help low-income, underserved communities join the economic mainstream.
The updated SBA loan program will also further attempt to help small-business owners reluctant to participate for fear of their loans not being forgiven by simplifying the forgiveness application process and deduction of business expenses paid for with PPP funds. A new feature also establishes a $15 billion grant program to support shuttered live venues, theaters, museums, and zoos that have experienced significant revenue losses.
When the PPP loan portal re-opened last week, SBA Arkansas officials only initially accepted so-called “first draw” applications from participating CFDIs and minority depository banks, which locally include such lenders as Southern Bancorp, Arkansas Capital Corp., Forge Community Loan Fund and Communities Unlimited.
A “first draw” PPP loan is for those borrowers who have yet to receive a PPP loan before the program closed in August 2020. On Wednesday (Jan. 13), local CDFIs began accepting applications for “second draw” PPP loans, which include small business owners with fewer than 300 employees or have suffered a 25% reduction in gross receipts.
SBA Arkansas officials said they plan to dedicate specific times to process and assist the smallest PPP lenders with loan applications from eligible small businesses. After the first phase of PPP2 is rolled out, additional lenders will be able to submit first and second draw PPP loan applications in the days and weeks ahead.
“This new rollout of the Paycheck Protection Program will prioritize underserved, minority, veteran, rural, and women-owned businesses that were unable to take advantage of the first round of PPP funding,” said SBA Arkansas District Director Edward Haddock. “SBA’s partnership with Community Financial Institutions will ensure that every small business in our state will have access to the resources they need to keep their employees on payroll and overcome the challenges caused by the pandemic.”
On Dec. 17, Congress first approved $325 billion in new funds for the SBA’s signature COVID-19 aid programs as part of Coronavirus Response and Relief Supplemental Appropriations Act. Among many things, the 5,600-page bill includes $284 billion for PPP loans and $20 billion for sister Economic Injury Disaster Loan (EIDL) grants through SBA central offices in all 50 states, including the Arkansas district headquarters in Little Rock.
As noted, the retooled PPP loan fund only allows firms with fewer than 300 employees and at least a 25% reduction in revenues in at least one quarter in 2020 to gain access to up to $2 million in forgivable loans, down significantly from the earlier 500-employee baseline and $10 million maximum loans in the original CARES Act passed by Congress nearly a year ago.
According to an analysis of PPP loan data gathered through Freedom of Information Act requests from the U.S. Department of Treasury, the largest 17 companies in Arkansas that received over $5 million in forgivable PPP loans under the CARES Act. Altogether, these Arkansas businesses ranged from VCC Construction and India-based Welspun to nonprofits and healthcare entities like Arkansas Hospice and the Arkansas Pulmonary Clinic.
Among the other 450 or so Arkansas firms and nonprofits that received PPP loans over $1 million, nearly half will be ineligible to receive new loans under the 300-employee thresholds. Although not a big issue in Arkansas, the new legislation also makes publicly traded companies ineligible to receive PPP2 funding after dozens exploited loopholes in CARES Act rules get access to hundreds of millions of dollars in forgivable loans.
North Little Rock-based Inuvo Inc., a thinly traded stock whose shareholders in include former Acxiom CEO Charles Morgan, was awarded a $1.1 million forgivable loan through the federal program. Under PPP2, the North Little Rock-based data marketer would be ineligible for a second draw loan.
When the original PPP fund was launch on April 3, 2020, U.S. Treasury and SBA officials halted all applications in the pipeline after only two weeks amid technical delays and snafus that created backlogs at SBA district offices nationwide.
Following criticism nationwide that larger SBA-approved lenders and Wall Street banks in the program rigged the loan process to benefit large corporations, publicly traded firms and their bottom line to the tune of nearly $6 billion in commission and fees, Congress approved another round of nearly $325 billion in PPP funding three weeks after the first launch.
By late July, SBA’s District Office in Little Rock had processed a whopping $3.3 billion in PPP loans that were made to 43,181 businesses across the state. The average PPP loan was a tidy $78,246, keeping nearly 400,000 Arkansas workers off unemployment rolls, SBA Arkansas officials said. Nationally, 5,459 banks, credit unions, fintech and other financial institutions have processed more than 5 million SBA-approved PPP loans total $521.4 billion.
Today, the SBA said it has so far received 1,346,125 forgiveness applications for approximately $170.5 billion. SBA has made payment on nearly 85% of the applications, forgiving over $100 billion. For the smallest borrowers with loans up to $50,000, 88% have been approved for forgiveness.
As part of its ongoing efforts to assist local small businesses across the state impacted by COVID-19, the Arkansas SBA Office on Wednesday (Jan. 13_ held a webinar with the Better Business Bureau of Arkansas attorneys from Little Rock law firm Friday, Eldredge & Clark to outline details of PPP2 and other COVID-19 relief funding programs in 2021. SBA officials said other such events are planned in the coming weeks.