By Wednesday, Montana banks had made about $500 million in loans to about 5,300 small businesses as part of a new federal program that began April 3.
The federal government no longer releases state-level data on the initiative — called the paycheck protection program — which provides loans to businesses to help them remain open and avoid layoffs as they grapple with the economic fallout from the coronavirus pandemic.
“We have been asked not to provide local data yet,” said Brent Donnelly, deputy director for the Montana office of the U.S. Small Business Administration, the federal agency overseeing the paycheck protection program. “But I can say Montana banks have been doing a very impressive job.”
States haven’t been allocated a set amount from the paycheck protection program. Instead, the money is available on a first-come, first-served basis.
Nationwide, more than 500,000 loans totaling $131 billion had been approved by Thursday afternoon, Donnelly said.
Loans from the $349 billion paycheck protection program, which is part of a $2 trillion stimulus package, enable businesses to cover up to eight weeks of payroll and related overhead. Loans will be forgiven if 75% of the money borrowed is used to retain employees and 25% goes to expenses such as rent and utilities. Money spent outside the restrictions must be paid back at a 0.5% interest rate.
There have been challenges with the new program.
When the loan program opened April 3, the Small Business Administration was overwhelmed with banks requesting that more of their staff have access to the agency’s system for processing the loans, Donnelly said. Those issues were resolved within a few days.
Now, the challenge is that banks are busy processing loans because there is so much interest in the program, Donnelly said.
First Security Bank, which has several branches in Gallatin County, has processed 750 loans since the program opened a week ago, said president and CEO Jim Ness. The U.S. Small Business Administration launched the program so quickly that First Security Bank was reviewing businesses’ applications while the federal agency was still issuing rules about how to administer the loans.
“The biggest challenge was this all came so fast,” Ness said. “We’ve had to make adjustments on the fly.”
First Security Bank closed its first loan Thursday. The bank is working to close loans quickly because the Small Business Administration requires all loans to close within 10 days.
The bank also continues to accept new loan applications but has limited them to existing customers to manage the demand.
“This is a monumental task, but our staff has been doing everything they can to get this money out the door and into people’s hands,” Ness said.
Rocky Mountain Bank, which operates in Bozeman, announced Friday that its holding company, Heartland Financial USA, Inc., had processed $1.5 billion in paycheck protection loans. Heartland Financial reported receiving 7,000 loan requests between April 3 when the program launched and Monday when it stopped providing loans.
Rocky Mountain Bank President and CEO Tod Petersen said the bank is doing all it can to help small businesses, but “even those like Rocky Mountain Bank that have strong liquidity and are well-capitalized, do not have unlimited resources to meet the needs of customers during this crisis alone.”
Congress is now working to set aside an additional $250 billion for the paycheck protection program. However, Democrats and Republicans have reached an impasse over the funding, so it is not clear when it will be available.
Democrats have said they want to provide the additional money to the program but would like to package it with assistance for hospitals and state and local governments. However, Senate Majority Leader Mitch McConnell, a Kentucky Republican, has said he would like Congress to consider the additional paycheck protection money on its own.
Montana Republican Rep. Greg Gianforte called the Democrats’ efforts “outrageous” and said their demands “hijack this critical program that will help restart our economy after our nation overcomes this public health crisis.”
Democratic Sen. Jon Tester has urged his fellow senators to approve the additional money and to expand the businesses that are eligible for the loans to include outdoor companies with seasonal employees, taverns with income from gambling and tribal businesses.
“Montanans have shared with me their concern that the (paycheck protection program) will run out of funding before all the lenders are able to process loans or small businesses are able to reply,” Tester said in a news release. “This is unacceptable and must be addressed.”
Republican Sen. Steve Daines has also worked to expand the number of businesses that are eligible for loans through the paycheck protection program. He said he has successfully pushed for agricultural businesses to be included in the program.
“Montana farmers and ranchers are facing tough challenges and hardships because of the coronavirus pandemic,” Daines said in a news release. “It is only right that our ag producers have the same access to relief that was secured for small businesses in the Coronavirus Economic Recovery Package.”