The federal rollout of the $350 billion federal Payroll Protection Plan (PPP) has been a rollercoaster ride for bankers and employers alike. In Santa Barbara, demand for PPP loans by local employers trying to make payroll is “insane,” according to one individual who answered the phone at Union Bank’s downtown Santa Barbara offices. At Montecito Bank & Trust, more than a thousand applications popped through the portal in the first four hours, said Megan Orloff.
The “waterfall of applications” was reviewed over the weekend, Orloff said, with the bank returning 250 voicemails and emails to boot. To keep its customers apprised of the latest, the bank has set up a COVID-19 Resources website.
The program intends to give employers loans that enable them to maintain payroll and costs, like medical insurance and family leave, in order to keep employees on the books — and off unemployment insurance. When the coronavirus loosens its grip on American life, the idea is that employees come right back into their jobs. Some costs like rent or mortgage interest and utilities might be covered, as well. And the major boon is that the loan would be forgiven if the employer keeps all its employees.
Michelle Martinich at American Riviera Bank observed there was a huge need for the program in the community but a lot of confusion because it rolled out so quickly. Even now, changes come daily.
At first, it was unclear what level of due diligence the payroll documentation had to have, said accountant Tony Vallejo, who is helping his clients with their payroll paperwork for the loans. Without such guidance, banks and borrowers could later learn the Small Business Administration would not forgive the loan. For Santa Barbara’s relatively small banks, a one percent loan is untenable; for those borrowing out of need, it would be even worse.
Banks also have to ensure the borrower clearly understand the terms of the loan, said Martinich, and the rules they must comply with in order to have the loan forgiven. For instance, her bank was still awaiting word on whether an employer contribution to a 401k qualified as a payroll expense. In the meantime, the Small Business Administration website is clogged with applications.
During the week before the COVID loan program rolled out, the terms of the loans changed repeatedly, said Vallejo, a former Goleta city councilmember. Congress authorized not more than a 4 percent loan over 10 years, he said, but three days before the April 3 rollout it went to two years at a half-percent, and bounced back to two years at one percent the next
“Depending on how you look at it, it’s either been challenging or a nightmare,” said Vallejo. “Bankers are working super hard,” he added, citing an email he received at 2 a.m. on the latest update.
The April 3 program addressed small businesses and sole proprietorships. As of April 10, independent contractors and the self-employed can apply for payroll and certain other expenses through PPP.
Trying to bridge the information gap and provide businesses some guidance are a rolling series of video conferences and webinars by SCORE Santa Barbara, which is a free business mentoring nonprofit. At the SCORE website (SantaBarbara.score.org) is a PPP update from April 6. Coming up are evening webinars on:
• Corona Crisis Relief for Small Business on April 9
• Para pequeños negocios y emprendedores 9 de abril
• the Economic Injury Disaster Loan (EIDL) Program on April 13
• Pivot Your Business to E-Commerce on April 15
• How to Email Market in Times of Business Downturn on April 23
The U.S. Chamber of Commerce sponsored a webinar with Jennings Imel, the executive director of its Western Regional Office, which can be viewed gratis after registering here. Imel covers an immense amount of territory in less than an hour, including the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act. Part of that includes the PPP, but also payroll tax deferment, tax credits, how the PPP and EIDL loans interact, and more. Imel recommended the Treasury website home.treasury.gov/cares for up-to-date information.
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