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Tie & Timber Beer Co. co-owner Curtis Marshall says Paycheck Protection Program funding allowed him to keep paying employees even as the tasting room was closed for several weeks. The taproom is now open with occupancy restrictions.
SBJ photo by Jessica Rosa
Tie & Timber Beer Co. co-owner Curtis Marshall says Paycheck Protection Program funding allowed him to keep paying employees even as the tasting room was closed for several weeks. The taproom is now open with occupancy restrictions.

Flexible Funding: Bankers support PPP changes for small businesses

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The end of May marked eight weeks since the first businesses were awarded Paycheck Protection Program funding through the federal coronavirus relief bill. An effort passed through the U.S. House of Representatives May 28 and the Senate June 3, seeks to provide business owners more flexibility with that funding.

The move is welcomed by some local bankers, who say customers of the Small Business Administration program should have more than eight weeks to use the funds and still be eligible for loan forgiveness.

“You have to go back and look at when this PPP program opened up, April 3. Some (businesses) were getting funds within the next two or three days,” said Scott Tennison, senior vice president and director of guaranteed lending at Legacy Bank and Trust Co. “Restaurants, our local businesses, still weren’t open. … There is that concern they’re going to be able to spend those funds in time.”

The measure passed by Congress would give companies 24 weeks or until the end of the year, whichever comes first, to spend the funds and still qualify to have the PPP loan forgiven. The legislation – titled the Paycheck Protection Program Flexibility Act – also would lower the forgiveness requirement of funds used on payroll to 60%, from the program’s original 75%, and extend the repayment timetable to five years from two years on any portion of the loan that is not eligible for forgiveness. According to media reports at press time, President Donald Trump is expected to sign the bill into law.

In the Springfield area, 52% of business owners in SBJ Publishing Inc.’s Economic Growth Survey reported applying for a PPP loan. As of May 30, the SBA reports nearly 86,500 loans with a combined value of $9 billion were awarded to Missouri companies.

“The SBA and the Treasury [Department] did their very best to put a program together that would solve some short-term needs for payroll protection,” said Commerce Bank Southwest Missouri Region Chairman and CEO Doug Neff. “There are always a few areas that could have been a bit better. They are trying to address those so it is more flexible to really help the smallest businesses be able to use the money effectively.”

Hardest hit
Some of the hardest hit during the COVID-19 pandemic are restaurants, bars and service-oriented businesses, as many were required to close or shift operations to-go during state and local shutdown orders, which began to be lifted last month.

Tie & Timber Beer Co. LLC co-owner Curtis Marshall said its tasting room reopened May 10 after weeks of closure, only offering crowlers for curbside pickup. A PPP loan kept all nine brewery employees on the payroll.

“Our staff is incredibly valuable to T&T. Their knowledge and experience of our beers and processes is vast,” Marshall said. “The PPP program allowed us to pay them a full salary based on sales projections as if the pandemic had never occurred. In reality, they were working very limited hours.

“They really could make more money if we laid them off. We gave that option to every single one of our employees and none of them took it.”

Tie & Timber was awarded the PPP funding, which Marshall said was under $100,000, the second week of April. The company has yet to exhaust the funds, however, and Marshall was supportive of the move to have more flexibility to use the funds.

He also credited community support with keeping the brewery afloat during closure.

“Overall, it was actually much better than I anticipated in the very beginning. It was still worse than our worst January month – break even at best,” he said.

Marshall said the business also had recently wrapped up construction on an outdoor beer garden, and the return on investment will be significantly delayed after a series of music and art festivals this spring and summer were canceled.

“It was financed by cash during a time when cash is king,” he said. “We definitely don’t have any regrets doing it and during the pandemic we have that great outdoor space where people feel comfortable in. Having that beer garden out there is really going to increase the amount of traffic that comes to the tasting room.

“We put ourselves in a pretty strong position before this even happened. It’s always been important to us to have some funds saved away for a rainy day.”

According to SBJ’s Economic Growth Survey, the average local business has enough cash on hand for 12 weeks of expenses, while nationwide, JP Morgan Chase estimates businesses have reserves to last just under a month.

Next wave
As the legislation on increasing PPP funding flexibility awaits the president’s signature, Commerce Bank’s Neff said employees are preparing for forgiveness applications to begin pouring in for the roughly 4,500 loans valued at $1.5 billion processed bankwide in round one of PPP funding. Current SBA guidance has an end-of-October deadline for forgiveness applications.

“Here in the next couple weeks that process will be full on,” he said. “SBA has put out the forgiveness application and the rules. There are still quite a few areas that have yet to be defined that we’re all working vigorously on to prepare.”

Financial institutions have 60 days to review forgiveness applications, followed by 90 days of review at the SBA. Neff said employees are advising commercial customers to begin collection payroll documentation, as well as rent and utility payments. He said the company made an early decision to only accept PPP applications from current customers to expedite the auditing process.

“Based on the amount of applications and based on the amount of data, this program has the ability to have some fraudulent activity and we really wanted to focus on our clients,” he said.

Dustin Royster, chief credit officer at Legacy Bank and Trust, said customers will be required to provide extensive documentation on how PPP funds were used in the bank’s approval process. He said Legacy Bank approved 565 loans valued at $72 million. The SBA has said that it will manually audit any company that received over $2 million in PPP funding, which Royster said represents a few of the bank’s clients.

While the first round of $350 billion in PPP funding ran dry in weeks, roughly $120 billion of the second round of funds are still available, according to SBA data.

“There is enough funding if it’s needed,” Rosyter said. “From our experience, the demand has started to slow.”

Some businesses are turning to traditional lending options.

“We’re starting to now see a little bit of an increase in loan requests,” he said.

“I wouldn’t say we’ve been overwhelmed with anything at this point. Businesses are still working through their PPP money.”

Tennison added that businesses can still apply for loans through the SBA and receive payment support. SBA will pay six months of principal, interest and fees on 7(a), 504 or microloans disbursed through Sept. 27.

“That is going to help those small businesses out immensely,” he said.

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