Washington Trust president expects PPP loans to go quickly

SPOKANE — Small-business owners looking to apply for a federal loan to help keep their business going should act quickly, because once this round of Paycheck Protection Program, or PPP, funds are gone, there may not be any more, according to the head of Washington Trust Bank.

“Funds are limited,” said Jack Heath, Washington Trust president and chief operating officer. “I’m not confident there will be a third round.”

Heath told the Columbia Basin Herald on Thursday that his bank is again processing PPP loans for small businesses following the first round and the passage last week of a bill approving $310 billion for additional PPP loans.

Congress created the program in late March as part of its $2.2 trillion relief package for businesses hard hit by closures and loss of business related to the COVID-19 pandemic, with $349 billion set aside for Small Business Administration loans. That money was all loaned out in 14 days.

Last week, Congress approved another $310 billion for lending programs administered by the Small Business Administration, or SBA.

Steven Burke, a business adviser with the Small Business Development Center in Tukwila, said he expects that $310 billion “to go quickly” as banks like Washington Trust process a backlog of applications. He suggested that business owners who don’t have an existing relationship with a bank look at an online lender such as Kabbage or QuickBooks Capital.

“Online banks may be better for non-customers,” he said.

The main details of the PPP loan have not changed, both Heath and Burke said. The SBA, through an approved bank, will loan a business the equivalent of eight weeks of payroll, with some additional for rent and utilities, and has promised to forgive the portions of the loan used for payroll so long as the business owner uses at least 70 percent for that purpose.

The loans are for two years at an interest rate of 1 percent, and the U.S. Treasury has said it will buy any outstanding PPP loans from banks, Heath said.

However, Heath added that small farms — those with 500 or fewer employees — are also now eligible for PPP loans.

Burke said the Economic Injury Disaster Loan, or EIDL, has also been refreshed, with $60 billion — $10 billion for grants. The loans, which are made directly by the SBA, will cover the amount of “injury” — the difference between revenue in 2019 and 2020 up to $2 million — for as long as the SBA expects the crisis to last.

The up-to-30-year loans carry an interest rate of 3.75 percent for for-profit businesses and 2.75 percent for non-profits, according to the SBA website.

Burke also said that some business owners may find the IRS’s Employee Retention Tax Credit — which will allow businesses to claim a tax credit for 50 percent of wages up to $5,000 per employee — easier to do than applying for either the PPP or the EIDL.

Heath said Washington Trust had approved around 3,500 PPP applications in the two weeks of the first round of lending, amounting to around $1.5 billion in new loans, adding significantly to the bank’s $4.6 billion pre-COVID-19 loan portfolio.

Heath also said that Washington Trust is willing to work with all borrowers right now, and he specifically noted that landlords who are current on their loans and who are having COVID-related challenges can get principal and payments waived until the crisis passes.

However, that is merely a waiver, he noted, and not forgiveness. Those payments will need to be made eventually.

Health said the SBA lending system was very manual, and that his bank — which has 43 branches in Washington, Oregon and Idaho — processed a few SBA loans every week prior to the creation of the PPP program.

“The SBA system was not designed to flood the economy with $440 billion in a week,” he said.

Charles H. Featherstone can be reached at [email protected].