Many troubled companies are expected to pursue their second PPP loan

Bangor Daily News (ME)

January 11 – Small financial institutions in Maine can start receiving applications for a new round of federal business loans starting Monday, and although they expect fewer takers than previous rounds last year , they predict that many companies still in difficulty will opt for a second loan.

The $ 900 billion stimulus bill signed by President Donald Trump in December included $ 284 billion for a new round of federal paycheck protection program loans, which have been a lifeline for businesses . Last year, Maine small businesses applied for more than 28,000 loans totaling nearly $ 2.3 billion in August under the forgivable loan scheme championed by Maine Senator Susan Collins in the foreground of pandemic recovery in March.

Needs have only increased for most businesses since the summer. More than 44% of small businesses in Maine saw their revenues decline in the week between Dec. 28 and Jan. 3, a higher share than the national average in the midst of a normally slower winter season and almost double that of the second week of August. , according to a census survey.

But like the initial rollout, which included delays and late changes that frustrated businesses and banks, the new rollout is already raising questions, especially from financial institutions unsure of when they can start. receive loan requests.

New borrowers can apply from Monday and those with outstanding loans can apply from Wednesday for a second loan. But new apps didn’t become available until Saturday, and the Maine office of the US Small Business Administration informed lenders on Friday afternoon that only community-based financial institutions with average total assets of less than $ 1 billion over the years. three previous years could offer loans from Monday.

This excludes most banks and credit unions, including Bangor Savings Bank and Camden National Bank, the two largest banks in Maine with assets of $ 6 billion and $ 5.2 billion, respectively. They will have to wait until later, perhaps until Wednesday, to start offering loans. Micro-lenders and certified development companies such as Eastern Maine Development Corp. in Bangor and CEI in Brunswick can offer the loans from Monday.

“The last time around, it was like building the plane while we were flying,” said Jim Donnelly, executive vice president and chief commercial officer of Bangor Savings Bank. “Now it’s more like trying to arrange the seats while flying.”

The bank has approved 4,800 loans worth a total of $ 470 million under the original paycheck protection program, about half of which have been canceled so far. Donnelly said Bangor Savings expects fewer large companies to apply for the second loan draw as they have changed their business models to deal with the pandemic.

But those who depleted previous loans or reserves as the pandemic dragged on longer than initially expected should apply, he said. More borrowers are likely to be small businesses and sole proprietorships. He expects a smaller average loan at $ 75,000, or nearly half of the original loans.

The new program includes guarantees to get money for smaller businesses. It does not allow public enterprises, whose loans have been a source of controversy, to apply. It places tighter limits on businesses applying for a second loan, including allowing fewer employees and requiring businesses to show a 25% loss in gross revenue between comparable quarters in 2020 and 2019.

“The stricter lending criteria this cycle really puts the priority on small businesses,” said Vanessa Madore, president of the Maine Savings Federal Credit Union in Hampden, which plans to handle as many loans as last time after taking it. processed 235 for a total of $ 4.2. million.

Client requests so far have come from companies looking for a second loan, said Craig Garafolo, executive vice president and chief operating officer of Kennebec Savings Bank in Augusta. He expects between 25 and 50% of the volume of first loans last year. The bank took out 650 payday loans worth a total of $ 57 million last year. More than half of these loans have been canceled so far. Borrowers had to use at least 60 percent of the payroll loans to receive a rebate.

Camden National Bank also expects increased demand for second loans, said Renee Smyth, executive vice president of the bank and director of experience and marketing. The bank loaned a total of $ 230 million in 3,003 payday loans last year, and so far 1,190 have been canceled.

It is still not clear whether another paycheck will be needed in a new stimulus that could fall under the administration of President-elect Joe Biden.

“This round is a good step forward, but I’m not sure how much money would be enough for the business,” Donnelly said.

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