Sonoma County banks rush to secure reopened SBA loans for clients

The federal Treasury reopened the cash spigot with $320 billion available in a second round of loans for small businesses to try to stay afloat during the coronavirus pandemic that has crippled the economy and forced the shutdown of most businesses.

Three weeks ago, the Small Business Administration backed $349 billion in loans that were allocated in a couple of days through banks and credit unions to desperate entrepreneurs nationwide. Once again, the SBA online lending portal was overwhelmed and Sonoma County lenders reported Monday they were experiencing significant delays as they processed loan applications for the Paycheck Protection Program, the main national lifeline for small businesses.

“It is overloaded and continues to crash, creating barriers for getting through the applications we have in hand as quickly as we anticipated. It's unfortunate as we have deployed additional staff to expedite the process,” said Brett Martinez, chief executive officer for Redwood Credit Union of Santa Rosa.

Redwood had a waiting list of about 1,200 commercial customers at the end of last week who wanted to take advantage of the program that enables companies with 500 or fewer employees to borrow up to $10 million. During the first round of lending, Redwood secured $87 million for about 1,000 members. The average loan it processed was $89,000 though that figure was inflated by one $10 million loan.

Companies don't have to pay back the SBA money if they use 75% of it to cover payroll costs and the rest on mortgage interest, rent, and utility payments over eight weeks after receiving a loan.

An array of local small businesses rushed to apply for loans, including many in the agriculture and hospitality industries. For example, Crimson Wine Group of Napa, owner of Pine Ridge Vineyards in Napa and Seghesio Family Vineyards in Healdsburg, received $3.8 million through American AgCredit, according to a filing with the Securities and Exchange Commission.

Silicon Valley Bank had about 200 winery clients who applied for loans this time, said Rob McMillan, executive vice president of the bank's wine division. During the first round, about half the bank's applicants secured loans with the average ranging from $160,000 to $200,000, he said.

Exchange Bank of Santa Rosa had hundreds of applications it was attempting to process through the SBA lending portal Monday. Michael Sullivan, an executive vice president, said things were going slowly. During the first round of lending, Exchange secured an average of about $200,000 for businesses that applied.

Sullivan said Exchange had a crew on standby to work late processing loan applications Monday night, when East Coast lenders would be done for the day.

The federal relief program is targeted for small firms, the engine for the local and national economy, to retain their workers or rehire people they furloughed since early March, as commerce ground to a halt during the virus-induced stay-home orders here and across the country. Nonprofits, sole proprietorships, self-employed individuals, and independent contractors are eligible for the SBA loans.

The massive number of job losses here and nationwide has been staggering. One in 10 workers in Sonoma County - nearly 25,000 people - filed applications for unemployment benefits last month. Nationally, that figure has grown to 26 million people.

Small-business operators are discovering that because the SBA lending program is structured to focus on immediate rehiring and job retention, it works better for certain industries than for others.

For example, some Silicon Valley Bank wine customers are quickly returning their first-round loans, realizing that they may not fulfill the requirements for making them forgivable.

“It sounded really good when it came out,” McMillan said of the federal aid. “Some wineries look at this now and say I don't really want to hire back all of my employees because I have nothing for them to do right now. ... The benefit of having that loan now is being second-guessed in some cases.”

Brian Reed, CEO of Summit State Bank of Santa Rosa, has heard the same concerns, especially from restaurateurs who currently can't generate their usual revenue because public health emergency restrictions only have allowed them to sell carryout meals.

“The reason people are holding on and not taking the (SBA) funding is they don't want to get that eight weeks ticking,” said Reed, who said Summit secured $82 million for 360 commercial customers during the federal program's first round of loans.

Summit State has carved out a niche serving nonprofits, also eligible for federal relief. That sector is especially vulnerable now and in need of financial assistance, he said.

“It will definitely be beneficial for the nonprofits,” Reed said. “There are a number of nonprofits that are really being hurt by this (virus-induced economic crisis).”

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