What do thousands of local car dealers, doughnut shops, liquor stores, plumbers, lawyers, churches and funeral homes have in common?
They took out Payroll Protection Program (PPP) loans earlier this year through a Small Business Administration (SBA) emergency relief program.
The PPP 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 fewer than 500 employees on very favorable terms: one 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.
As Congress is debating a new stimulus package for consumers and small businesses alike, the SBA recently released more complete details on recipients of round one of the program. An analysis of the data by The Item reveals 4,847 businesses in its readership area took out more than $300 million in PPP loans in an attempt to save about 36,000 local jobs.
A previous release of data in July was limited to loans greater than $150,000 and included only 525 local firms. More complete data was released last week listing every entity that took down a PPP loan as of late last month. Nationwide more than $521 billion of PPP loans have been guaranteed by the SBA for approximately 4.9 million businesses. The average loan size nationally is $106,772. Loans are made by banks directly to businesses, but repayment is guaranteed by the SBA. Nearly 5,500 banks participated in the program.
A close examination of the list shows that businesses in Lynn, Lynnfield, Marblehead, Nahant, Peabody, Revere, Salem, Saugus and Swampscott received a total of $322,170,544 in loans from the SBA – an average of $66,468. The loan amounts range from $5,857,165 for a social services agency to $394 for a self-employed hairdresser – both based in Lynn.
Nearly 1,000 Lynn businesses participated in the program and collectively received $82.1 million in loans, with an average loan of $85,934. Six of the top 10 Lynn recipients were healthcare-related entities, and, in total, 47 Lynn-based non-profits borrowed $18 million, including a dozen churches of various faiths.
“The EDIC was pleased to work with hundreds of Lynn businesses to assist with their applications to the SBA for the PPP,” said James M. Cowdell, executive director of EDIC/Lynn. “These dollars were desperately needed and helped more than 500 Lynn businesses.”
As with the other communities, the range of borrowers was varied. One landscaping company borrowed nearly $1 million, and the list included manufacturers, restaurants, landlords, dentists, and Essex Media Group, the company that publishes The Item. The program was designed by Congress to save jobs, and it appears to have largely served that purpose.
“This program made it possible for us to preserve all of our jobs and to continue to publish a community newspaper at a time when local news is vital,” said Edward M. Grant, Essex Media Group’s publisher. “It came at a critical time, and, for us, was just the medicine we needed to help us through the pandemic.”
But there has been some controversy over some aspects of the program. Early on, several large national chain restaurants circumvented the rules that were designed to target smaller businesses. And some businesses that did not suffer and even thrived during the pandemic still took loans.
If a business takes a PPP loan and then fails, there is little recourse for the SBA or the bank. While a few of the names on the local list have ceased operations, the vast majority are still operating. Those that abused the program could be forced to repay their loans with penalties if they applied under false pretenses.
Among local communities, Salem was second in volume of loans ($73.1 million to 846 companies), followed by Saugus ($36.8m/495), Revere ($36.1m/587), Lynnfield ($31.4m/306), Peabody ($30m/832), Marblehead ($15.7m/507), Swampscott ($14.8m/275), and Nahant ($2.2m/44). Lynnfield’s average loan seems high because of a business based there that has 395 employees worldwide.
The PPP loan program, which permits forgiveness of loans after SBA review so long as the funds are used to maintain jobs, is administered by banks. Locally, Eastern Bank dominated the origination, underwriting 1,277 of the 4,847 loans for a total of $92.1 million. Eastern issued nearly $1.2 billion in PPP loans across New England, delivering approximately 8,800 loans.
“In a year of extraordinary disruption and uncertainty for small businesses, Eastern has been committed to offer our help,” said Quincy Miller, president of Eastern Bankshares, Inc. and vice chair and president of Eastern Bank. “The SBA’s support of Eastern’s Small Business Impact Loan Fund and the separate federal Paycheck Protection Program (PPP) program has provided critical aid during this rapidly changing year, and we thank the SBA, our colleagues and all those in the community who have partnered to provide a source of capital and relief to small businesses when they have needed it the most.”
Citizens, Bank of America and TD Bank were the next most frequent lenders locally. Many area banks also participated, including National Grand Bank, Marblehead Bank, North Shore Bank and Salem Five.