In just two weeks, local banks issued about as many small business loans as they would typically do in a year.
From the moment the U.S. Small Business Administration (SBA) released guidance on the Paycheck Protection Program (PPP) to local banks, they were determined to issue as many loans as possible in those two weeks, local bankers said.
PPP loans were authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and are issued to small businesses seeking help to retain employees who are in danger of being furloughed, or to help employees who have been furloughed return to work, according to the SBA.
From April 3 to April 16, Indiana banks issued 35,990 PPP loans totaling $7.4 billion to small businesses impacted by the coronavirus pandemic and a statewide stay-at-home order, according to the Indiana Bankers Association.
[sc:text-divider text-divider-title="Story continues below gallery" ]
Click here to purchase photos from this galleryOn Friday, President Donald Trump approved the issuance of $310 billion in additional SBA loans, according to the association. These loans were available starting Monday, and funds are expected to run out even faster than the first round, the association said.
<strong>Bankers get creative, process millions</strong>
Small banks such as Mutual Savings Bank knew it had to help issue loans even though it was going to be a huge undertaking, said David Coffey, president and CEO.
Just like the Franklin-based bank has been doing since 1890, the goal was to be there when Johnson County needed it most, Coffey said.
“We have seen the highs and the lows,” Coffey said. “As we go out and talk to people … we say Mutual Savings is a local bank handling local problems.”
At Mutual Savings, the approach was proactive and customer focused, said Rob Henderson, senior vice president and chief lending officer.
“Focusing on this is all we did once the Senate passed the bill,” Henderson said. “We took a lot of pride in informing our customer base. We proactively reached out to our customer base and followed up with those who reached out to us.”
Mutual Savings approved 98 loans totaling $5.7 million in seven days, Henderson said. Those loans helped 880 area workers keep their jobs, with 80% of the funds issued going to Johnson County companies, he said.
About 30 more small businesses have already submitted applications and have been approved internally for the second round of funding, Henderson said. Mutual Savings lending officers kept working on loan applications even after the first round of funding dried up to put local applicants at the front of the line for the first-come, first-served loan, he said.
Lake City Bank, a Warsaw-based bank with branches in Greenwood and Indianapolis, issued 15% of its $530 million in PPP loans to Indianapolis-area businesses, said David Findlay, the president and CEO.
Small banks each found solutions to challenges they faced with doors closed to the public and most bank employees working from home, Findlay said.
“[The coronavirus] has made it more challenging for the banking system in everything we do,” Findlay said. “Amazingly, it did not prevent us from doing this.”
Each bank was creative in how it communicated with the public, and came up with alternative ways to process the loans. Lake City Bank had customers sign documents in their cars and submit paperwork through the drive-thru, which was then scanned and sent to heads of lending in Warsaw, Findlay said.
Mutual Savings did a mass drive-thru signing on rainy April 17, when 95 business owners signed documents from their cars using their own pens, while loan officers ducked into the bank to process the paperwork, Henderson said.
Horizon Bank, a Michigan City-based bank with five Johnson County branches, took an online-only approach to process 124 loans totaling $10 million for Johnson County businesses, said David Bedwell, market president for Horizon in Central Indiana.
“We are fortunate that everything is so technology driven that we can do everything from home that we can in the office,” Bedwell said.
One of the best things about the program is that the loans are available to small businesses that are often forgotten, Bedwell said. For loans to Johnson County businesses by Horizon, 97% are under 350,000 and 55% are under 50,000, indicating that the loans helped small businesses with small payrolls continue operations, he said.
“We, as a bank, and myself personally, feel fortunate that we are able to partner with businesses and help them through this time,” Bedwell said.
<strong>Small businesses gain sense of security</strong>
Because the loans are calculated based on payroll, the biggest way the loan helps is making sure small business employees still get paid, local business owners said.
Pat Hagan, who received a PPP loan for both of his businesses, 10 Pins and Blue Top Communications, is glad local banks made the process easy, he said.
Both loans allowed Hagan to pay employees who had been furloughed. At 10 Pins, a Franklin bowling alley, he was able to pay his one full-time employee and send bonus checks to part-time employees who are still on payroll, he said.
The loan certainly helped, but whether 10 Pins is out of the woods will be determined by how much longer Gov. Eric Holcomb orders businesses to stay closed, Hagan said.
“(The loan) is better than nothing. (But) it depends on how long the government makes us be shut down,” Hagan said. “If we have to stay shut down for 30 to 45 days, we might not be (OK).”
Since Blue Top, a telecommunications company, is an essential business, it stands a better chance at survival, even though business has slowed during the pandemic, he said.
<strong>Nonprofits get help, too</strong>
PPP loans were also available to nonprofits. United Way of Johnson County received a loan to make sure all five of its employees could continue working through the pandemic, said Nancy Plake, executive director.
That money was crucial because United Way staff are busier than ever helping agencies cope with the pandemic, Plake said.
“Our services have increased so we really cannot do what we are doing with COVID-19 without a full staff,” she said.
Another reason the extra money was necessary is to cushion the expected blow a significant rise in unemployment will give to United Way funds, Plake said.
Since much of the organization’s funds are brought in through payroll deductions, United Way is expecting its donations to decline as a result, she said.
“When people are not working and they have to go on unemployment, we don’t get those payroll deductions,” Plake said. “It will help with our cash flow when those start to get shut off.”
Since many employers disburse those deductions every few months or quarterly, the decline in funding is expected to start in July, she said.
With many offices working remotely, workplace fund drives, another big source of revenue, will also not be possible, Plake said.
United Way leaders are already thinking about ways to overcome the shortfall, and considering how to carry on annual events that are typically held in the summer and fall in the age of COVID-19.
“We want to be able to have enough cash on hand to fund our agencies at the level we agreed to,” Plake said. “For some agencies, our funds are the only thing they have.”
