Though the federal Paycheck Protection Program ran out of funding several weeks before its May 31 application deadline, one local lender still has access to a pool of $8 billion reserved for Community Development Financial Institutions.
"When everybody got shut off, the banks were reaching out and asking us to help," said David Smart president and CEO of Trust Federal Credit Union. "One of them was telling us we were the only place that could do them within 100, 200 miles."
Josh Brown, senior small business specialist for the Tennessee Small Business Development Center, confirmed that Trust is the only game in town when it comes to local access to the last of the funds in the second round of the pandemic rescue program.
While there are other lending agencies locally that are Community Development Financial Institutions, Trust Federal Credit Union is the "one and only solution" that can make the Paycheck Protection loans in the Chattanooga area, he said.
Community Development Financial Institutions are private lenders that focus on economic development in underserved and impoverished communities. One such local institution, BrightBridge Capital, isn't qualified to make the Paycheck Protection Program loans because of the way they are categorized in the latest round of funding, said Mike Ohlman, president of BrightBridge.
"Although we seem to be listed as participating in the current round of [Paycheck Protection] loans, as a [Community Development Financial Institution], we are in fact not authorized by [Small Business Administration] for the current allocations," he said. "Our [Paycheck Protection] approval was as a Community Advantage lender, rather than under our [Community Development Financial Institution] authority."
Paycheck Protection Program snapshot
* Forgivable federal loans through the Paycheck Protection Program originally included $349 billion in funding, but that money was gone within two weeks of applications opening in April 2020.* A second round of funding for $320 billion wasn’t depleted, but applications closed in August.* Applications for the most recent round, this time with $284 billion in funding, were initially open through March 31, but the deadline was extended to May 31.* That funding ran out in the first week of May.* At the end of 2020, more than 5 million businesses in the U.S. had tapped $522 billion in the stimulus funds, including more than 99,000 businesses in Tennessee and more than 169,000 in Georgia.* When it concluded in May 2021, the program had distributed nearly $800 billion in forgivable federal loans.
The massive rescue program for businesses hit by pandemic losses has sent nearly $800 billion in potentially forgivable federal loans to U.S. businesses since it launched a little more than a year ago. The latest round of funding ran out in the first week of May for conventional lenders. And anyone who wants to seek the last of the funding through a Community Development Financial Institution had better hurry, Smart said.
"The most important thing is, if someone is thinking about it, don't wait," he said. "Now is not the time to be thinking about it - if you want one, you need to jump on it."
The program ends May 31, but Trust will likely stop accepting applications in a week, around May 26, to allow processing time, Smart said. That's assuming the funding holds out, he added.
"We have no idea how long it will last," he said.
Trust has made about 50 Paycheck Protection loans in this round of the program, with most of those coming in the last few weeks as banks sent small businesses their way, Smart said. All but one of those loans was for less than $150,000, Smart said.
By contrast, Pinnacle Bank made loans worth $77.6 million to more than 600 local businesses in the most recent round of funding.
Round 2 of the Paycheck Protection Program
* Businesses had to show a 25% quarter-over-quarter revenue loss.* Restaurants and other hospitality businesses could multiply their average monthly payroll costs by 3.5, making them eligible for more funding.* Second-time PPP borrowers could qualify for a second loan if they had used up their first PPP loan and had fewer than 300 employees — down from 500 in earlier rounds of funding.
Small businesses don't necessarily have to work with local lenders to pursue the last of the Paycheck Protection Program funds, Brown said. They can work through national clearinghouse operations that will take their applications and try to match them with a qualified lender, Brown said. But local connections are "a game-changer" in terms of success in seeking the funds, he said.
"We really encourage business owners to develop those local banking relationships," he said. "Nothing against the big national banks, but they tend not to have as many boots on the ground."
Contact Mary Fortune at mfortune@timesfreepress.com. Follow her on Twitter @maryfortune.