By Thursday afternoon, 300 applications for the latest round of the Paycheck Protection Program had already been received at First Southwest Bank in Durango.
First Southwest and Native American Bank in Denver are Colorado’s only two Community Development Financial Institutions that target underserved businesses. They were among the specialized financial institutions allowed on Monday to begin accepting the first applicants for the current round of PPP assistance.
All other participating banks with $1 billion or more in assets, which is all of Durango’s other banks, will begin taking PPP applications Tuesday. Applications will be taken through March 21 or until all the allocated money has been disbursed.
First Southwest Bank CEO Kent Curtis said: “They really wanted to target underserved businesses in this round. Most of our applicants are sole-proprietors. We usually help them fill out their applications before they submit it. What was interesting, in the first round, the first applicants tended to be bigger businesses with accounting and finance departments, businesses that had CPAs.”
The latest COVID-19 relief package allocates $284 billion nationwide for a new round of PPP loans. The loan amount can be forgiven if businesses show at least 60% of proceeds go for payroll expenses. Also, the other 40% of the loan can go to a broader range of operational expenses.
During the current PPP round, $25 billion has been set aside specifically for businesses with 10 or fewer employees. Also, Curtis said Community Development Financial Institutions have access to a protected pot of PPP funding.
Mary Shepherd, executive director of the Southwest Colorado Small Business Development Center, in a Zoom webinar explaining how the latest round of PPP will work, said: “This time, they really wanted to make sure the money is landing with the businesses that need it the most.”
Businesses that have received previous PPP loans must show that they have fully used their PPP money or will fully use it before disbursement of the latest PPP loans.
Other eligibility requirements for the current PPP round include:
Businesses must have 300 or fewer full-time employees.Businesses must show at least a 25% decline in revenue in any quarter in 2020 compared with 2019.Businesses must not be permanently closed.Businesses must not be publicly traded.Additionally, lenders will examine businesses looking for long-term viability of the business.
There are no fees to apply, no collateral is required and no personal guarantee is required. Borrowers who cannot meet forgiveness provisions will pay 1% interest rate on a five-year term and borrowers can prepay without penalty.
The size of a business loan will be based on 2½ months of a business’ average payroll, up to $10 million.
However, the size of the loan for restaurants, bars, brewpubs, distilleries, wineries and businesses in the accommodation and hospitality field will be based on 3½ months of the average payroll.
During the initial round of PPP funding, Curtis said First Southwest issued a little more than 800 PPP loans. First Southwest provides loans to businesses across Colorado, principally in the southern part of the state, and in northern New Mexico.
“I think we’ll probably end up doing between 500 and 1,000 this round,” he said. “There’s reserved funding for CDFIs. We’ve got a separate pot of money to tap, and I don’t anticipate we’ll run out.”