Banks pump ‘millions’ into local economy

Staff Written News

By Tia Lynn Ivey

managing editor 

Local banks are lending millions of dollars to Morgan County businesses under a new government program aimed at keeping businesses afloat during the coronavirus pandemic which has put millions of Americans out of work. 

The Paycheck Protection Program (PPP), guaranteed by the Small Business Administration, is in full swing to dole out “forgivable” loans to employers so they can continue paying employees and keep their businesses going during this stalled economy. 

Bank of Madison and United Bank of Madison are swamped with applications from local businesses, poised to lend out millions in Morgan County alone. 

The Bank of Madison has reviewed 125 applications thus far, approving about $7 million in loans through the program, according to Tom Greenfield, a credit analyst for Bank of Madison. 

“We are really proud of the fact that we have been able to help over 900 families through this program. We expect to help around 1,000 families in total,” said Greenfield, who explained the loans distributed will go toward funding these families’ paychecks. “Bank of Madison is a small community bank and we are proud to be able to help our local community.”

United Bank’s Madison branch is reviewing about 65 applications, also anticipating lending out several million dollars to businesses throughout Morgan County, according to Paul Courchaine, the Madison Division’s President of United Bank. 

“It’s a lifeline for these businesses,” said Courchaine. “It helps them stay in business and keeps this economy going. This will enable them to weather this storm and keep their employees employed.”

Under the program, banks lend out their own money to eligible businesses and the SBA guarantees the loan, reimbursing the banks. Businesses who take the loans are eligible for loan forgiveness if they follow the rules of the program, which stipulate 75 percent of the loan funds must be used for payroll expenses. 

Under the Paycheck Protection Program, the Federal government has authorized up to $349 billion for the PPP loan program to help small businesses.

As previously reported in the Morgan County Citizen, the SBA will forgive these PPP loans if: 1) Employees are kept on the payroll for eight weeks; and 2) The money is used for payroll, rent, mortgage interest or utilities. The SBA says that at least 75 percent of the forgiven amount must have been used for payroll.

According to the SBA, the PPP loans are designed to provide a direct incentive for small businesses to keep their workers on the payroll. PPP is available through June 30, 2020. Any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organizations or 501(c)(19) veterans organizations affected by coronavirus/COVID-19 may apply for the program. According to the SBA, small businesses in the hospitality and food industry with more than one location could also be eligible at the store and location level if the store employs less than 500 workers. This means each store location could be eligible.

While primarily targeting small businesses, the SBA says that businesses in certain industries with more than 500 employees may be approved for the program if they meet the SBA’s size standards for those industries.

Application instructions can be found on the SBA website which says to: apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. Consult with your local lender as to whether it is participating in the program.

In addition, the SBA stipulates that “the loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75 percent of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.

The SBA says forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease. This loan has a maturity of two years and an interest rate of .5 percent.

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