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Paycheck Protection Program process may require patience

Review process requires patience from some businesses

Submitted Photo Ivan Guerrero, owner of 123 Clean, an oil-field services company, stands at a work site, holding a book by Coach Dale Brown, formerly of Minot.

Ivan Guerrero is grateful for the federal Paycheck Protection Program, which has enabled his company to keep employees on the job during the COVID-19 pandemic.

However, with a second PPP loan in hand, he’s anxious. Despite about six months of supplying the Small Business Administration with multiple pieces of paperwork, he still is waiting to hear whether his oilfield spill cleanup company, 123 Clean, will receive the program’s forgiveness on its first loan.

“The money came in really quick,” Guerrero said. “The problem is now I got my second draw, and the first one is still not forgiven. So I’m a little worried.”

He has questioned whether to keep his employees on or stop spending money from his second PPP loan, in case there is no forgiveness.

“It makes me very uncomfortable,” he said. “It’s just not a good feeling.”

His situation is atypical, according to some local lenders who have been assisting clients with the PPP. Most PPP borrowers have found or are finding the program’s forgiveness to be quick and easy.

Alan Haut, North Dakota district director for the Small Business Administration, which is administering the PPP, said the program’s unprecedented size can mean forgiveness delays for certain borrowers selected for a review process. However, the reviews are important to the program, he said.

“The reviewers will want to make sure that we are using the program for its intended purposes and benefiting the right businesses as the law requires,” he said.

The volume of work on the SBA’s end has affected how quickly paperwork is processed, particularly since the SBA has been tasked with other coronavirus assistance programs as well, he added.

“There’s just a lot of activity going on with the SBA right now. We try to focus on our highest priorities and keep everything going forward,” Haut said.

By automating the review, the SBA has been able to fast-track smaller businesses while still doing due diligence, he said. When a manual review is required, there generally will be a wait for a reviewer to become available and then for a second reviewer to concur.

The SBA reports 2.7 million of 5.2 million PPP loans have been forgiven during the first PPP round in 2020, including 20,510 in North Dakota. Forgiveness applications had not yet been filed on 2.3 million of those loans, while 195,000 are under review. Including the second round, loan numbers total nearly 9.9 million. The forgiveness period only recently opened for the second round.

Roscoe Streyle, senior vice president at United Community Bank, said a small fraction of the bank’s clients underwent review and only a small number of those are still going through the paperwork process to obtain their loan forgiveness. Those are mainly large employers.

“We have had no denials on the reviews,” Streyle said. “We don’t anticipate any issues at all with forgiveness.”

Streyle said for small businesses and farmers there was even more interest in the second round of PPP due to a change in the program that considers gross income rather than net income.

“The loans are a lot bigger and a lot more just because of that fact, and it’s been tremendous for self-employed individuals,” he said. “There’s a number of businesses that have told us – and I am sure other banks, too – had it not been for the program, they aren’t sure where they would be at this point. It’s good to hear that this program, obviously, worked. This one I have literally no complaints. It couldn’t have been handled any better.”

The majority of clients at First Western Bank & Trust who participated in the first PPP round that opened in April 2020 have completed the forgiveness process, according to the bank.

Zach Burdick, vice president of commercial lending at First Western, said applications involving loans of more than $2 million are automatically audited, while loans under $2 million may be audited based on random selection. About 20% of client loans at First Western have been randomly reviewed in the first PPP round, he said.

The economic impact of the loans has been significant, though.

“It has had a major impact on some of the borrowers we worked with. We can see it in the financial statements,” said Jersey Benson, vice president of commercial lending and business banking manager at First Western. “They are able to retain employees via this program.”

Town & Country Credit Union reported just as many applicants in the second PPP as in the first despite a requirement that businesses show a 25% reduction in revenue to become eligible. It happened in part because of additional businesses discovering they were eligible under the revised income rules, particularly farmers, ranchers and other self-employed business owners.

Fred Buechler, senior vice president of lending, and Tyler Neether, vice president of business lending, at Town & Country said there’s been a definite positive impact on the local economy due to the PPP program. It has not only kept people employed but it has enabled business owners, especially the self employed, to stabilize their companies and even make improvements, they said.

Guerrero said his two loans of about $40,000 each have helped his business.

Guerrero initially worked for different oilfield companies before starting his own firm in March 2019. Starting out with temporary laborers, he had just started bringing on employees when the pandemic and slowdown in the oil industry hit. Guerrero said the PPP money enabled his company to retain about five employees from April through September – which met program rules. A similar loan in January 2021 enabled him to recall the laid-off workers.

His business won’t survive without the loan forgiveness, though, he said. That’s why it’s been troubling to not have an answer yet from the SBA.

“It’s very frustrating,” he said. “I went above and beyond what any rule of the PPP was asking for. It’s just unsettling for me, because business has not picked up. Business is still very down.”

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