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May 8, 2020

Maine banks handling smaller loans in 2nd bailout round, as policy debate rages

Storefronts in downtown Portland of closed businesses. Photo / Renee Cordes Food and retail businesses are among the hardest hit by the crisis and shutdowns, and some of those most in need of PPP loans.

Some Maine banks say they're processing smaller loans in round two of the federal Paycheck Protection Program — and funds are still available.

The program was expanded after its initial $349 billion in funding was quickly depleted. As of last Friday, $317 million had been awarded to more than 9,000 small Maine businesses.

Amy Bassett, director of the agency's Maine District Office, told Mainebiz Thursday that while an updated state tally was not yet available, a total of 1,147,890 loans had been approved nationwide by late Wednesday, worth around $97.3 billion.

There were 5,422 participating lenders, and Bassett encourages those still wanting to apply to do so.

"There is still funding available, and lenders are continuing to submit loans on behalf of Maine small businesses," she told Mainebiz.

Banks also say they welcome more applications with supply still strong.

"The real surprise about round two has been the ongoing availability of funds," said Patricia Weigel, president and CEO of Norway Savings Bank. "Many of us anticipated the pent-up demand would deplete the newly allocated funds quickly. But here we are, 10 days into it, and there's still plenty of money available."

In comparison to the first round, she said, Norway Savings has been helping many more sole proprietors, and the average loan size is smaller.

"Any business who hasn't already taken advantage of the program should definitely complete an application now."

Patricia Weigel  inside a Norway Savings Bank branch.
File Photo / Tim Greenway
Patricia Weigel, president and CEO of Norway Savings Bank

Weigel also said that reports about big businesses getting much of the money are not true.

"We have helped the very largest eligible companies as well as the tiniest of businesses here in Maine. New loan applications have slowed way down this week, and turnaround time for us is less than two days once we have a completed application."

Andrew Silsby, president and CEO of Augusta-based Kennebec Savings Bank, said that while demand for loans at the start of the round was strong, it has trailed off significantly.

"We have not taken a single application in the last 24 hours, so anything that comes in now is manageable," he said Wednesday.

In four weeks, he said, Kennebec Savings has closed and funded 574 loans for $52 million, about half its loan volume in a single year. He said the loans positively impact nearly 6,500 jobs in the bank's market area.

Loan sizes this time around are also smaller at an average $30,000, he said, compared to $130,000 in the first round. 

"Round two were really much more smaller businesses and sole proprietorships than round one," he added. "They also took a lot more time to validate to be able to submit to the SBA because the records were not as sophisticated as larger businesses. Picture a shoe box full of receipts for a visual, compared to a detailed payroll report directly from a business accounting software package."

From both rounds so far, 70% of the bank's 584 closed and funded loans through the PPP are below $50,000, he said. Silby noted a wide variation in amount sizes, from a single $400 loan to six loans of $1 million each.

Similarly, Camden National Bank is seeing about 30% less volume than in the first round, with the recent average loan size about 30% less, according to the bank's president and CEO, Greg Dufour.

But he also notes that sole proprietors and other smaller companies were not allowed to apply until the very last days of the first phase.

"From a process perspective, Phase 2 was very challenging from the start, but things eventually smoothed out," Dufour told Mainebiz on Friday. "The major benefit from Phase 2 is that Maine's smaller businesses are getting the support they need."

Banks and credit unions 'have really stepped up'

Chris Linder, CEO of nonprofit MaineStream Finance in Bangor, also said he thought round two appears to be going relatively well.

Courtesy / Chris Linder
Chris Linder, CEO of MaineStream Finance in Bangor

"Maine banks and credit unions have really stepped up and were fair to all types of clients relative to other states' financial institutions," he told Mainebiz Wednesday. He also said he is happy the amounts are smaller this time around,  but said that businesses still have some concerns.

"Many businesses are wary and mistrustful that the amounts may not really be forgiven," he said. "It is still a leap of faith," which may be holding some individuals back.

Linder said that while there has been some good clarity from the U.S. Treasury Department that if the businesses tried to rehire and their employees refused, the businesses would not lose the forgiveness if they show a good faith effort to rehire.

"But there are still a lot of questions on how the forgiveness will work," he said. He also said that two months' worth of loans does not seem to be enough, especially for restaurants and hospitality businesses.

"There are huge concerns of what happens in June and July when these funds run out and they cannot reopen, or they do reopen and there are no customers," he added.

Frey, Golden among critics 

Meanwhile on the national stage, Maine Attorney General Aaron Frey earlier this week joined a coalition of 24 state attorneys general calling for key changes to the Paycheck Protection Program to ensure that funds are distributed fairly and equitably.

In a letter to congressional leadership, the AGs express concerns that while the program is helping small businesses and their employees, it has suffered from a lack of transparency, technical savvy and functionality. The result, according to the letter, is fund distributions that give an unfair advantage to large, well-connected companies.

To remedy the situation, the state officials are calling for boosting fair access funding for small businesses and that a portion of any future funding for the program be allocated exclusively for minority-owned small businesses.

U.S. Rep Jared Golden visiting a small business that makes fur and leather products in Greenville.
Courtesy / U.S. Rep. Jared Golden
From left, U.S. Rep. Jared Golden, D-Maine 2nd District, visiting a small business in Greenville in January that makes fur and leather products. It was not among the eight entities providing testimonials in Golden's recent letter about the Paycheck Protection Program.

U.S. Rep. Jared Golden, D-Maine 2nd District, has also voiced criticism of the bailout program, calling for urgent changes in a May 4 letter to Congressional leadership.

Among other things, he calls for clarifying how businesses will qualify for loan forgiveness and consider extending the terms of loan repayment for those who fail to meet the full standard for forgiveness to a longer period than 24 months.

"Failure to make this change could drive employers out of business six months from now when high dollar monthly payments begin."

Golden's three-page letter includes testimonials from eight Maine businesses. They include Atlantic Brewing Co. in Bar Harbor, Darby's Restaurant in Belfast and the River View Resort in Bethel.

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