The PPP was designed to help keep America’s workforce employed during the pandemic, and the program is accessible to small businesses, independent contractors, self-employed individuals and nonprofits, among others affected by the coronavirus pandemic. The SBA will forgive loans if employee retention criteria is met, according to SBA documents.
As of July 28, more than 5 million loans totaling $520.1 billion have been dispersed to businesses across the nation. At least $40.9 billion of that funding went to 400,000 Texas organizations.
According to the SBA, there is less than $130 billion left in the original $660 billion program. The PPP reopened in July, and the new deadline to apply for a loan is Aug. 8.
Tim Jeffcoat, the district director of the SBA in Houston, said the program has been successful in retaining Houston-area jobs. This interview has been edited for length and clarity.
How have operations at SBA Houston changed during the pandemic?
On March 15, we stopped business as usual, and we launched into doing webinars educating our lenders on how they could best meet the needs of all the businesses. We also focused on educating our large partner network of chambers of commerce, economic development organizations and congressional offices and, of course, have had public webinars.
It’s become a very different world for us, but we haven’t abandoned what our mission is—helping Americans start and grow their small businesses. In recent weeks, about half of our webinars have been about COVID survival, and the other half was for the many businesses out there that are doing fine. They might not be doing great, but they’re doing OK, and they’re still looking to buy the building they’re in or develop a new product line or doing some kind of expansion or growth.
What was the PPP designed to do?
PPP was brought into the world five days after the CARES Act passed. It had two rounds of funding—the first was $350 billion, the second was $310 billion. The [U.S.] Senate just passed a bill that the [U.S] House is hotly debating that looks like it’s going to be maybe another $200 billion.
PPP has been awfully important in the whole nation, not just in my district, and it has made a significant difference. It’s not enough for many businesses. Nobody knew when the CARES Act passed that [the coronavirus pandemic] was going to be something that went on for potentially a year or more. It was envisioned that "Hey, we’re going to give everybody two months’ worth of payroll to get through this thing, and then we’re all going to be fine." That obviously didn’t happen.
What does the process of applying for funding through the PPP look like, and what kind of feedback have you heard from Houston businesses about that process?
In the beginning, there were some issues [because] there was an absolute avalanche of demand for this loan. Really prolific lenders that the SBA works with might normally do 200 loans in a year that require SBA assistance for small businesses, and now they’re doing 1,000 loans a week.
There was exponentially more demand with the same workforce, the same systems, the same everything. So in the beginning, the biggest issues was, "They’re not talking to me, they’re busy talking to their existing customers." All that is understandable, but that got cleared out in the first few weeks when some of the demand was met.
Since then, we went from about 150 active lenders—banks and other lending institutions that work with the SBA to do loans for small businesses—to just under 500. That was an incredible growth rate just because of banks stepping up and saying, "Hey, we want to do this; we want to help." They have all done a tremendous number of loans.
Now we find ourselves with probably no more than 25 that are doing PPP loans at the moment. It’s not because they don’t care; it’s because they’ve already done so many things. Now they’re focused on getting those paid for or getting them off of their balance sheets and helping their clients achieve maximum forgiveness. If they just keep on doing loans, they’re going to get diluted to the point where they may not be able to help. Many of these banks are community banks—it’s very important for them to be able to help a business and not just write them a check.
How many loans are approved for every PPP application sent through?
I can tell you the approval process is super streamlined. Under ordinary disaster circumstances, there is a particular process of applying for an SBA disaster loan to help you get through it, and certain industries are excluded. With Congress’s instruction through the CARES Act, we essentially created a program so that virtually any business that fits the criteria could be approved for PPP.
You had to have payroll, you had to not be a felon and then a couple of other circumstances. But other than that, virtually everyone was able to be approved. I would assume that the pass-through rate of applications for loans was extremely high, and that is still the case.
The doors have been opened just about as wide as they can be made because it’s very unusual times. This is perhaps a once-in-a-lifetime virus that causes this kind of physical and economic devastation. To be able to open the doors that wide was critical for businesses to survive.
With what the Senate is proposing, they’re clamping down on that and making it much smaller so they can get relief to where they think it’s needed the most.
What’s next for the program, and is there any concern about funding running out?
I think it goes a little bit deeper than that. This sounds silly, but money is just money. Once you get some money in your hands, you can pay a few bills, et cetera, but you still have a business. You still have customers that are doing business with you. You still have a very contagious virus. What do you do? I think that is really the thing today that is particularly relevant. We’re hearing a lot from businesses it’s not just how you pivot.
First, it’s how do you survive this thing? We don’t want your business to close. In a typical natural disaster, for instance during Hurricane Harvey, our statistics show us that about 40% of the businesses that have to close never reopened. PPP was designed so that you wouldn’t have to close. Because once you close, the process starts.
But it’s not just about survival. Secondly, it’s about being able to adapt what you do so that you can exist at this time—not just survive. You can still run your business; you can still get enough revenue out of it to pay your bills.
And then third, it’s about being able to get your business to the point where it is truly a competitive business that can withstand something like this. The really important thing for every business of any size right now is paying really close attention to what your customers are doing today. Your buying habits are probably changing. The people that you have purchased from historically, you may no longer be purchasing from because you don’t want to visit their establishment. That may never change—you might decide not to go back there because you’re OK with what you’re getting from Amazon or Target via the web.
So, it’s not just that your business is being affected. Your customers are being affected, and your supply chain is being affected. That’s a significant task to essentially redesign your business so that it can withstand the next COVID, the next Harvey, and do fine and continue to grow.
What business trends are you seeing in different job sectors throughout the Houston area?
We worry a lot about people-dense businesses—restaurants, bars, entertainment venues, hotels, athletic clubs. Those are some of the worst hit in the area from what we can tell because, obviously, if you can’t open the door to your restaurant, that makes it really difficult to sell any food.
But we have great examples right here in the Houston area of businesses that are finding ways to not only survive but adapt. You can always stop at the curb to pick up some food from a local restaurant, and they might deliver, but then you’ve got businesses like Peli Peli that has started a retail line of their meals they’ve packaged and delivered to Kroger to sell in the ready-to-eat section.
What we worry about is the business that says, "I have a restaurant with 20 tables; I have a kitchen, but if I don’t have people to put at those tables. I can’t be open." Yes, you absolutely can be open. There’s 100 different ways those meals can leave your kitchen and get into people’s hands and have them put money in your pocket.
Learn more about resources and educational webinars available through SBA Houston at www.sba.gov/offices/district/tx/houston.