Another Round of Federal Bailout Money To Hit The Market

BNB Bank CEO Kevin O'Connor

Congress and the White House reached an agreement this week on a deal that will provide an additional $320 billion in funding to the Payroll Protection Program after the initial $349 billion earmarked for it in last month’s $2.2 trillion Coronavirus Aid, Relief, and Economic Stimulus Act was devoured in less than two weeks.

The PPP funding will be the lion’s share of a $480 billion relief measure that includes an additional $60 billion intended for the smaller businesses that were left behind in the initial allocation of funding.

Another $75 billion will be set aside for hospitals and $25 billion directed toward establishing a nationwide testing program for the coronavirus.

The Senate passed the measure on Tuesday, and the House of Representatives is expected to approve it Thursday. Once President Donald J. Trump signs off, the money is expected to begin flowing to beleaguered small businesses within days.

The low-interest loans offered by the PPP through the Small Business Administration have been immensely popular because of their generous terms. Businesses that use the proceeds to keep their employees on the books for eight weeks are not required to pay back the amount that was used for payroll and other expenses such as mortgages or rent.
But in the wake of the initial distribution, there have been complaints that many larger commercial banks were too quick to dole out large loans to larger companies, leaving many of the tiny mom-and-pop businesses that make up the backbone of the American economy without funding.

The SBA has reported that only 0.3 percent of the loans approved in the initial wave accounted for 9 percent of the money reserved for the program.

In the agreement reached this week, House Democrats succeeded in adding $60 billion to the SBA’s Economic Disaster Injury Loan program, with that money being directed to smaller banks and the kind of smaller businesses, including those owned by minorities and women, that may not have a working relationship with a bank.

Gregory Ferraris, a principal with GNFerraris LLC, a Sag Harbor accounting firm, in an interview on Saturday, said local businesses whose PPP loans had been approved were already seeing the money hit their bank accounts.

“What this will do is allow these small businesses to move forward” as restrictions imposed by Governor Andrew Cuomo are eventually lifted and rehire workers who were laid off, he said.

But he said just two days after the initial pot of money ran out that it was clear additional funding was needed. “It’s tough to qualify how much will be needed,” he said. “There are businesses and industries that did not receive funding in the first round. These are businesses that were forced to shut down without any notice.” How long they can survive in shutdown mode is directly related to how well they are capitalized, he said.

Mr. Ferraris said his firm had helped about 100 clients fill out the applications for the PPP loans. “About 80 percent of the applications we filed were with BNB Bank,” he said. “They were very proactive, right from the beginning.”

BNB CEO Kevin O’Connor said the bank processed about 2,500 loans totaling $700 million. “It was a very concentrated effort, a very passionate effort,” he said. “The day the legislation was passed, we hit the ground running.”

Although most bank employees were working remotely, Mr. O’Connor described “an all hands on deck” approach in which bankers separated into teams to work on different sections of the applications. “It was not a technology solution, it was a brute force solution,” he said.

As the amount of funding remaining dwindled, Mr. O’Connor said many of the bank’s staff members worked overnight to process loans when the SBA’s website worked faster.
He said while most of the loans were processed for existing bank customers, about 15 percent were applications from non-customers. “But, of course, our goal is to make them customers,” he said. As more money becomes available, he said the bank would likely entertain applications from more noncustomers simply because its own customer base will have been serviced.

“Our board and I am incredibly proud of what these people have done for our community,” he said of the bank’s staff, “because in the end we are only as successful as the people in our community.”

Greg D’Angelo, the owner of D’Angelo Construction of Sag Harbor, is one of BNB’s customers whose loan was approved.

He said his company was well prepared and submitted its paperwork on the first day the PPP loan funding was available. “A week later, I got confirmation we were approved,” he said. “The funds were in my bank account that Monday morning and on Tuesday we rehired all our furloughed employees.”

Mr. D’Angelo credited his accountant, Ron Farnworth, and his comptroller, Laura Anderson, for installing the software that allowed his company to quickly pull together important records, and Tara Fordham, the manager of BNB’s Sag Harbor branch, for working after hours to make sure his application was complete.

“I’m a builder. That’s what I do,” he said. “All the other stuff? I don’t know anything about that.”

Lynne Jones, the owner of Lynne’s Cards and Gifts in Westhampton Beach, was not so lucky. “BNB was working around the clock to process applications,” she said. “But I needed some information and it took a couple of days longer. They didn’t get my application in time before the money ran out.”

Both Mr. Ferraris and Mr. O’Connor said it was important for businesses to be prepared for the next round of funding.

Carolyn Evert, a spokeswoman for JP Morgan Chase Bank said nationwide the bank funded approximately $14 billion in loans for companies that employ more than 1.1 million people. Half of those loans were for less than $140,000 and more than 65 percent of the loans the company processed were for companies with fewer than 25 employees.

“We are fully prepared to help our customers when the next round of funding is approved,” she said via email. “We have hundreds of thousands of additional applications that we’re actively continuing to process in the meantime. These could total an additional $26 billion.”