Banks Respond to Additional SBA Funding
First branch of Banque Financière in Jeffersonville. (courtesy: Steve Ziegelmeyer)
First Financial Bank is headquartered in Cincinnati. (photo provided)
The Trump administration is asking lawmakers an additional $ 250 billion to help small businesses as they struggle to survive during the pandemic by paying employees and keeping them out of unemployment.
This new round of funding would be in addition to the $ 350 billion already allocated to the paycheck protection program through the CARES Act.
“The sooner you get in, the better,” warns Jeff Magginnis, senior vice president of Cincinnati-based First Financial Bank. “The dollars are going to run out.”
The program went into effect last Friday. Magginnis says the SBA informed banks on Tuesday that it has already approved 208,000 applications, representing $ 78 billion.
“We expect that in the next week or 10 days the money will be used,” says Magginnis. This is one of the reasons the US Treasury Department is asking Congress to act quickly to replenish the fund.
“We received 500 applications within a few hours. We have currently received over 4,000 applications and already over $ 1 billion in program loan applications. And it’s fair to our banks, ”says Magginnis, who stresses that applicants shouldn’t wait.
The PPP, which is administered by the Small Business Administration, offers a forgivable loan to small businesses eligible for funding by providing up to eight weeks of payroll.
“Seventy-five percent must be spent on the payroll,” says Magginnis. “It also covers, for most clients, mortgage interest on a commercial real estate loan, rent and utilities. But payroll is the dominant use.
Magginnis says the SBA program is particularly geared towards restaurants and the hospitality industry, but all small businesses, freelancers and independent contractors can apply. He says even nonprofits, such as churches, can seek funding.
“Churches are not normally allowed in the SBA program, they are in fact eligible,” Magginnis said.
The SBA is very liberal on PPP by not requiring any guarantees or personal guarantees. Forgiveness is based on the retention or prompt rehiring of employees by the employer.
As the program started accepting applications last Friday, Magginnis said private contractors and self-employed people are technically not expected to apply for the loan program until April 10, but Magginnis encourages such people to contact their bank. “Be aware of their processes. “
Magginnis says that a little-known aspect of the CARES Act is loan cancellation for companies that had previously borrowed money from the SBA.
“Congress has ordered the SBA to pay six months of payments for all borrowers in the SBA program,” says Magginnis.
He says the SBA rules are still being finalized, but they should start immediately.
“It’s six months of interest, principal and associated fees and no future repayment obligations, which is fantastic for the borrower.”
First Financial Bank has 71 branches in Indiana.
Magginnis tells Inside INdiana Business that customers are concerned about their business, but help is available.