The reopening of the popular Paycheck Protection Program, which was recently infused with more federal money after large companies had scooped up much of the initial cash, has already approved twice as many loans for New York small businesses than were processed in the first round.
In the second round, 164,271 loans were approved for New York businesses as of Friday, five days after the program reopened, data released by the Small Business Administration shows. However, $175.7 billion of the fresh $310 billion appropriated by Congress for the program remained available for forgivable loans intended to help small businesses weather coronavirus-related shutdowns and disruptions.
Garry VanGorder, executive director of the Cortland County Business Development Corp. and Cortland County Industrial Development Agency, said Wednesday his office has spoken with more than 100 companies seeking help in the economic crisis touched off by the coronavirus pandemic.
In comparison, in the first round of the program in early to mid-April, just 81,075 PPP loans had been approved for New York small businesses.
VanGorder has directed business owners to the Payroll Protection Program and the Economic Injury Disaster Loan Program, both administered by the U.S. Small Business Administration.
“We have counseled a great many businesses on the differences,” VanGorder said.
Some businesses were not sure if the aid would help if it caused them problems.
Strings attached to the first round of funding discouraged some companies from applying, he said. Companies receiving funds could be penalized if employees refused to return to jobs because it was more financially beneficial to receive unemployment assistance supplemented by other federal funds. If too few employees returned, the federal funds would convert to a loan, rather than a grant.
“Some wondered if they should bring people back for six weeks if they do not have any work for them to do,” VanGorder said. The second round didn’t penalize companies if an employee refused to return.
The loan totals to the state show more of the new approved loans are smaller. In the first round 81,075 New York loans totaled $20.3 billion; the 164,271 loans approved for New York so far in the second round total $17.6 billion.
Nationally, the average loan size in the second round of the program is $76,000, down from $206,000 during the first round. The SBA has already approved 550,424 more loans in the second round of the PPP program than in the first.
In the first round, more than 200 publicly traded companies, including at least 16 in New York, were approved for PPP loans, and many of those were multi-millions of dollars, including a luxury cruise company affiliated with National Geographic, a film distribution company that provides content to Netflix and Hulu, a mid-size battery manufacturer with more than 500 employees and a financial management firm serving wealthy individuals.
“To further ensure PPP loans are limited to eligible borrowers, the SBA has decided, in consultation with the Department of the Treasury, that it will review all loans in excess of $2 million, in addition to other loans as appropriate, following the lender’s submission of the borrower’s loan forgiveness application,” Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza announced last week.
The SBA still has not released a complete list of the companies approved for PPP loans in the first round. Democratic senators have requested that the administration’s inspector general investigate reports that banks prioritized loans for their wealthier business clients. Under the program, banks receive more compensation for the large PPP loans they administer than for smaller loans.
To ensure more loans went to small lenders in the second round, Congress reserved $60 billion of the new $310 billion for small banks, community development financial institutions and minority depository institutions.
Small businesses with fewer than 500 employees (with a few exceptions) can be approved for PPP loans of up to $10 million. Three-quarters of the loan must be used to pay employees within an eight-week window to have the loan forgiven.
Restaurants have lobbied to change the terms to allow businesses to use more of the money to cover rent and flexibility on when they can use the money because many restaurants remain closed.
City Editor Kevin Conlon and the Times Union of Albany contributed to this report.