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Local lenders, small business owners sprint as paycheck protection program runs dry

Small businesses will soon be able to apply for loans through Paycheck Protection Program
Posted at 4:10 PM, Apr 16, 2020
and last updated 2020-04-16 19:02:26-04

CLEVELAND — Funding for the federal government's paycheck protection program designed to help small business keep employees on the payroll ran dry Thursday morning, reaching the $349 billion lending limit. Prior to Thursday's announcement, local lenders and small business owners frantically tried to get applications and loans approved.

The Paycheck Protection Program (PPP) is part of the CARES Act, the federal stimulus package that Congress passed in order to inject life into the coronavirus pandemic-stricken economy. Under PPP, small business owners impacted by COVID-19 could apply for loans of varying amounts that would be forgiven by the Small Business Administration (SBA) if the money was used to pay the business owner's employees. In a statement released Thursday, the SBA announced that the funding limit had been reached after the agency had issued more than 14 years worth of loans in less than 14 days.

Congress has been contemplating whether to inject another $250 billion into the program.

During the frantic two week application period, John Kropf, a longtime SBA lender, said PPP moved at a lightning pace. Kropf is the president of Growth Capital Corp., a non-profit economic development agency headquartered in Cleveland.

"I've been an SBA lender for 30 years and I've never seen things move so quickly. I've never seen things move so streamlined," Kropf said. "Everyone is doing this for the first time. It's never been done before. I have to say our banking partners, the SBA, the US Treasury... I've never seen such speed and agility."

Kropf said the first few days of the application period brought a deluge of applications. As of Wednesday of this week, his firm of six employees, which typically handles loans below $250,000, had more than 50 applications and more than $4 million in loans approved. He said the response to the program highlights how desperately some small business owners needed the funding.

"Once they close their doors, the chances of them not re-opening are much greater. If they operate even if it is on a diminished basis, if they keep that payroll going, the chance of that business' survival are much greater," Kropf said. "It's really I think intended to support small business workers, to keep them working. If workers get disconnected from their employers, sometimes it's hard to get them back."

That line of thinking is exactly what prompted Amy Wong, the president of Dot Org Solutions, a local marketing agency tailored to non-profits, to apply for the funding. Although her business, which has four employees and a smattering of independent contractors, has not had to lay anyone off, the funding provides financial assurance as the true length of the pandemic remains unknown.

"I just didn't see the downside of taking advantage of this program and I knew I needed to do it quickly," Wong said. "I think the application process was pretty straightforward. Actually, it was much easier than getting any kind of any traditional business financing, which we have done in the past. We applied right away."

Wong closed on her PPP loan on Thursday.

"We're able to maintain consistency," Wong said. "We're able to have conversations about how we're coming out of this instead of how is it that we're going to stay alive? How is it that we're going to stay in business? By having this loan we can look 6 months out now."

Kropf said he told many of the small business owners that applied last week and early this week that they would have to be patient because the demand was overwhelming. At this point, however, it is unclear how many of those applicants will receive funding in light of Thursday's announcement.

"We jumped in head first. It was not easy. We're figuring all this out on the fly, learning as we go," Kropf said. "For every lender out there, no one has ever done this before. The amount of innovation, ingenuity and agility, has been really been, I think, important to making this work as well as possible."

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