Tips on making the most of the second PPP round

Recently passed federal legislation makes available a second loan from the Paycheck Protection Program (PPP). Some $284 billion is now available for both new and first-round PPP borrowers, who have until March 31, 2021, to apply for a loan.

There are, however, differences between this and the previous round, as well as a great deal of knowledge gained regarding the process, that can help businesses that are looking to leverage the opportunity.

Smart Business spoke with Kurt Kappa, Chief Lending Officer at First Federal Lakewood, about what businesses should know about the second round of PPP loans.

What differences exist between the first and second round of PPP loans?

Borrowers that received first-round PPP funding can tap into the second round up to 2.5-times their average monthly payroll, up to $2 million per borrower. In order to get this second round of funding, the borrower has to have 300 or fewer employees, must have used the full amount of their first PPP loan and must show a 25 percent gross revenue decline in any 2020 quarter compared with the same quarter in 2019. Companies in the food services industries, however, will be eligible to receive a second round of PPP funding of up to 3.5-times their monthly average payroll, though that’s still capped at $2 million per borrower.

Many of the costs eligible for forgiveness are the same: payroll, rent and certain mortgage, interest and utility expenses. But for the second round, eligible expenses have grown to include supplier costs, covered worker protection and facility modification expenditures — including PPE — as well as certain operating costs, such as software and cloud computing services and accounting needs.

Eligibility rights for the second round of PPP funding — those applying for the funding for the first time — include businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans, and sole proprietors, independent contractors and eligible self-employed individuals. While 501(c)(6) organizations that meet certain qualifications are now eligible for the second round of PPP loans, publicly traded companies have been excluded.

What are some tips on navigating the process?

Choose one banking partner and work with it on the application process. Submitting multiple applications through multiple bankers could put up a roadblock. Banks saw that happen during the first PPP round. Applications that were in the queue were held up in the system if a second application was discovered.

Also, provide everything your banker is asking for because they know what needs to be submitted for the application to be successful. During the first round, some businesses challenged their banker on the information being requested, and that just created a drawn-out process and may have cost some companies their loan.

Companies that didn’t apply the first time because they didn’t qualify should look to apply this time around. Eligibility requirements have changed, so some that weren’t eligible in round one could be eligible this time. Additionally, the second round has been tweaked to support smaller businesses as well as minority-owned businesses and smaller nonprofit organizations.

Businesses that don’t need the funds should not apply. So many times in the first round, companies just took the funds because they could. With the duration of the pandemic, many more businesses could benefit from the loans and the goal is get them the support they need.

What was learned from the first round that can be applied to the second round?

Businesses that took advantage of the first round of funding likely recognize the importance of having a strong relationship with a banker. Any organization that felt their banking partner was not helpful in securing a loan might want to re-evaluate their banking relationship.

March 31 is the application deadline. Organizations that intend to apply for funding should talk with their banker before applying to create a checklist to verify all the information needed to apply is assembled. Providing a full loan package will streamline the process and position companies to get a formal approval quickly.

Insights Banking is brought to you by First Federal Lakewood.

How mutual banks benefit businesses and communities

Businesses have a number of choices when it comes to banking. Sometimes choosing a bank doesn’t center on a menu of products or current loan rates. Businesses may look at relationships between the businesses and the bank and the bank and the community to select the right bank for their companies.

Kurt Kappa, Chief Lending Officer at First Federal Lakewood, says mutual banks can be attractive to businesses because the institutions are owned by depositors instead of shareholders and are committed to helping their communities thrive.

“Depositor-owned means that, instead of just looking at quarter-to-quarter results, we can focus on the strategies and implement plans that reflect our customers’ needs,” Kappa says. “We combine that with our community commitment to help customers through good times and bad.”

Smart Business spoke with Kappa about the benefits of working with a mutual bank for both businesses and the communities in which they operate.

Why would it be in the interest of a business to bank with a mutual bank?

Mutual banks take a long-term approach. They’re looking to build relationships with their customers, understand their unique circumstances and offer solutions that support them. The structure of mutual banks allows deposit dollars to flow back into the community. It also allows personal banking relationships to flourish.

Community investment, personal relationships and local service contribute to the strength of these financial institutions. The more success businesses experience, the greater the positive impact on communities and ultimately, the greater the success for mutual banks.

How is working with a mutual bank different than other banks?

One key differentiator is businesses that work with a mutual bank often get to meet everyone involved — from the branches to the CEO and Chairman. Businesses aren’t just a number. There’s a relationship there and part of the relationship is knowing the decision makers.

In addition to reinvesting money into communities, mutual banks are very active in the communities they serve. They step up when they’re needed, donating money, sponsoring events and donating employee time to perform community service.

How can a business make the most out of its relationship with a mutual bank?

Mutual banks are stewards of their communities. They’re going to partner with businesses’ customers, area nonprofits and local economic development departments. Together, they all work to make their communities better. By working with a mutual bank, businesses are contributing to that cycle of support and improvement.

As more businesses establish relationships with a mutual bank, the bank can lend more to the community — other businesses, a neighbor down the street — and perpetuate the cycle of support. Additionally, mutual banks are always working to promote the community relationships that they’ve established, bring together community stakeholders and highlighting what businesses are doing to make their communities better.

But, what’s often most important for businesses is the banking relationship. And in difficult times, it may make sense for businesses to take a step back and evaluate their current banking relationship. Not all business owners are aware of the differences between banks and how deposit dollars are invested. Now is a good time to learn what local banks are doing to help businesses in their community. For the many businesses that care deeply and contribute significantly to their communities, working with a bank that does the same can be important.

Insights Banking is brought to you by First Federal Lakewood