Local banks invest in their communities

Many small businesses in Carbon County have been impacted by the COVID-19 shutdown. The Coronavirus Aid and Economic Security (CARES) Act was created to help alleviate the damage to these businesses and their employees.

The main force of the small business stimulus in the CARES Act is contained in the Paycheck Protection Program (PPP). The $349 billion initiative, funded under the Small Business Administration (SBA) Business Loans Program Account, is meant to supply loans to businesses to guarantee eight weeks of payroll and other costs to help those businesses survive and allow their workers to pay their bills.

Understanding what the PPP business loan program is, how it works, and how to apply can make a difference in weathering the shutdown. This massive federal stimulus program can get funds to businesses in need in a timely manner. A business that is in trouble due to the current pandemic is encouraged to apply for a PPP loan as soon as possible. These loans are available for the lesser of $10 million or 2.5 times a business’s average monthly payroll and 100 percent of the loan be forgiven if guidelines are followed properly. A business must apply through any SBA approved 7(a) lender. A PPP loan can go through any of the 1,800 participating SBA approved 7(a) lenders or through any participating federally insured depository institution, federally insured credit union or Farm Credit System institution.

In Carbon County, the RNB State Bank (RNB) and Bank of Commerce (BOC) have been helping businesses in their communities get the PPP this past week. Both banks work to help a business find out if they have PPP eligibility first. In addition to meeting the size requirement of 500 or fewer employees for most companies, a company must show that its business has been negatively impacted by the coronavirus. This is done by certifying on the PPP application that the present economic uncertainty makes the loan request necessary.

At RNB, Rawlins Market President Scott Thayer said all the branches have had staff there to help all applicants navigate through paperwork. Given how new the program is, this has not been an easy task.

Eligibility is broken down to include any business categorized under accommodation or food services, such as restaurants and hotels that have 500 or fewer employees per location; tribal businesses; independently owned franchises; self-employed workers; independent contractors; 501(c)(3) charities and sole proprietors.

Thayer said all RNB branches in Carbon County were wildly successful in being able to help almost all the local applicants that put forth their request.

BOC CEO Copper France said his bank was also able to help all eligible customers apply and get their loan.

“We helped quite a few,” France said. “We were not turning any of our customers away. It is challenging because it is a slow process and labor intensive but getting funds into our customers in need is a priority.”

France said BOC did help some non-customers but the bank had to focus on helping customers first because they supported the bank in the past. He recognized the needs of non-customers and asked for them to exercise patience as this was a new program and his bank wanted to help all the businesses that it could.

Thayer made the same point. He agreed that, during this time of crisis, RNB wanted to help as many businesses as possible but the bank had hit a cap at the moment and first priority were the bank’s customers. He said the bank was still taking applications for when the next round of loans could be given.

The banks are using their funds to make the loans in an immediate manner which are, in turn, guaranteed by the SBA.

PPP loans are desired because they can be forgiven in their entirety if businesses adhere to the guidelines. All or part of the loan received under PPP can be forgiven if a business keeps all employees on payroll or rehires them by June 30, 2020. Payroll costs must be 75 percent or more of your approved loan amount and only 25 percent of the amount forgiven can be used on non-payroll expenses. The forgiveness won’t happen until the end of the eight week period of employment following receipt of the loan.

Employee payroll costs include salary, wages, commissions and tips and is capped at $100,000 per employee. Benefits included are vacation, parental, family medical or sick leave. For sole proprietors it pays wages, commissions, income or net earnings from self-employment capped at $100,000. If it is a seasonal business, the PPP takes the average monthly payroll between February 15 and June 30 which is capped at $100,000. If a new business was started, the PPP takes the average monthly payroll from January 1 to February 29 capped at $100,000 per employee.

The other eligible forgivable costs that can only be 25 percent of the loan include interest on mortgages, rent under lease agreements and utilities.

A business must request forgiveness of the loan from the lender in writing. A request should document the number of full time equivalent employees, pay rates, the payments on an eligible mortgage or lease, and utility payments. The lender has 60 days to reply.

The PPP is one of two programs designed to help small businesses during the coronavirus crisis. The other is the Economic Injury Disaster Loan (EIDL) program. While both programs help struggling businesses get back on track financially, they have slightly different approaches.

The PPP is a new stimulus package created to help companies keep workers by covering eight weeks of payroll plus some other costs of remaining in business. It is 100 percent forgivable if guidelines are followed.

The EIDL is an established program that helps small businesses deal with the loss of revenue during a declared disaster such as a hurricane, flood, fire, and the COVID-19 pandemic. This loan includes a $10,000 advance that is automatically forgiven if a business does the application.

Many small business owners do not know they can apply for both an EIDL loan and a PPP loan for the COVID-19 disaster. There are rules, including the requirement that a business can’t use money from both loans for the same thing. If a business uses the PPP loan for payroll, it can’t use an EIDL loan for payroll too. Both loan programs apply to small businesses of 500 or fewer employees.

There are differences between the two loans. The loan administrator for the PPP are SBA approved lenders. For the EIDL, a business must go through the SBA. The maximum amount for the PPP is the lesser of $10 million or 2.5 times the average monthly payroll. The EIDL maximum can be up to $2 million. The term for the PPP is two years and the term for EIDL can be up to 30 years. The interest rate for the PPP is one percent and for the EIDL is 3.75 percent. The deferral to start payment for PPP is six months with interest accruing, while the EIDL allows one year for deferral with interest accruing. Collateral is not needed for the PPP loan and collateral is not needed for a loan under $25,000 with EIDL. There is no guarantee needed for the PPP, and no guarantee needed for loans under $200,000 with the EIDL.

For the PPP loan, advice can come from a local lender if a business is eligible.

At this time, nobody can predict how long the COVID-19 pandemic is going to last and what damage it is going to inflict on Carbon County businesses. RNB and BOC both recognize this. This is why their staff worked so diligently last week to get the PPP loans in to help their customers.

“We are thankful we’re able to help the people of Carbon County when they need it most,” Thayer said. France had similar thoughts.

“We are here to take care of Carbon County residents,” France said. “Thick or thin, we’ll be here.”