The Small Business Administration released a listing of the Paycheck Protection Program (PPP) loans it made in excess of $150,000, including 425 loans made to businesses in the Item circulation area.
The list identifies four local companies that received between $5 million and $10 million and 10 companies that took down $2 million and $5 million each.
Thirty more companies borrowed between $1 million and $2 million, and another 109 companies got between $350,000 and $1 million. Borrowers cover the full range of local business types, including restaurants, professional service firms, real estate developers, private schools, home improvement contractors, a funeral home, and Essex Media Group, the publisher of The Item. The full list is available via www.sba.gov.
The principal goal of the program was to preserve jobs and, if the funds are used as intended, the loans to small businesses in The Item’s readership area could help save nearly 20,000 jobs. The average local business on the list was working to preserve 46 jobs. The largest had 500 employees, the smallest as few as six. Many other companies applied for and received loans of less than $150,000, and therefore were not on the list released.
James M. Cowdell, chairman of the Economic Development & Industrial Corp. of Lynn (EDIC/Lynn), said that money was a godsend.
“This is the worst economic disaster in my lifetime,” Cowdell said about the downturn that went hand-in-hand with the COVID-19 shutdown. “I’ve never seen anything like this. And federal money that came to the City of Lynn was desperately needed.
“Many of the people who received it had tears in their eyes. It kept their businesses going. “
Eastern Bank led all banks with 109 area loans, followed by Citizens Bank with 45, North Shore Bank and Bank of America with 30 each, and Salem Five with 29. A total of 63 banks made loans to Item area businesses. It was a profitable undertaking for the banks, who earned origination fees of as much as 5 percent for facilitating the loans.
“(The PPP) has a heightened focus on payroll costs. Were they not to have access to PPP, employers would have to let people go,” said Salem Five Executive Vice President for Retail Banking Joseph F. Riley.
The PPP program was part of the CARES Act passed by Congress in March with the intent of injecting funds into small businesses suffering the consequences of COVID-19. The program provides loans to businesses with 500 or fewer employees on very favorable terms; 1 percent interest with up to two years to repay.
The loans are eligible for forgiveness provided they are used for certain expenses — principally employee salaries. The amount a company is eligible to borrow was capped at 2.5 times its average 2019 monthly payroll.
Nationwide, more than $521 billion of PPP loans have been guaranteed by the SBA to approximately 4.9 million businesses. The average loan size nationally has been $106,772.
Loans are made by banks directly to the businesses, but repayment is guaranteed by the SBA. Nearly 5,500 banks participated in the program.
Businesses receiving these loans do not have to guarantee that they use the funds for salaries or other approved expenses (rent, utilities, etc.). If they do not use the funds for those purposes they must repay the loans over a two-year period starting later this year, along with 1 percent interest. Controversially, if a business takes a PPP loan, then goes out of business, there is little recourse for the SBA or the bank. There is opportunity for abuse, but the program is widely credited with saving hundreds of thousands of jobs nationwide.
“The program made it possible for us to retain all 33 of our employees and continue to produce our daily and weekly newspapers in a time when many of the other newspapers resorted to layoffs and cutbacks,” said Michael H. Shanahan, Essex Media Group’s CEO. “From our standpoint it was a lifesaver.”
“At a time when accurate local news could play a crucial role in helping our community deal with the pandemic, this program made all the difference,” said Edward M. Grant, EMG’s Publisher. “Our staff could focus on keeping our readers informed.”
North Shore Bank CEO Kevin M. Tierney said that once the program got going, it proved to be a great relief
“The program got off to a rocky start but ultimately it provided great relief at a critical time for a number of small and medium-sized businesses. We view it as beneficial to the overall relief of businesses to mitigate the impact of the pandemic,” said North Shore Bank CEO Kevin M. Tierney.
Originally slated to expire on June 30, Congress recently extended the application period for PPP loans to Aug. 8. Applications can still be made via most banks. Borrowers must certify that COVID-19 has negatively impacted their business and will have up to 24 weeks to spend the funds on approved uses if they would like to apply for loan forgiveness.