So far, from Chris Henry’s perch with the Profitability Program at TCA and FreightWaves, the assistance programs offered by the federal government are getting money into the hands of carriers.
Henry, who is vice president of carrier profitability with FreightWaves and program manager for the TCA profitability program, said the Payroll Protection Program is “definitely” working.
“I heard from four more carriers in the program getting their funds either Friday night [April 10] or (Monday) morning [April 13], so that’s good,” Henry said. He also said he has not heard of any outright turndowns.
Meanwhile, Jack Rybicki, the managing principal of industry at the advisory firm of CLA (CliftonLarsonAllen), told FreightWaves in an email that there are indications that the U.S. Small Business Administration (SBA) is approving $1 billion in PPP loans per hour for all businesses. Noting that the CARES act that created PPP was just signed into law March 27, “it is pretty amazing that companies were able to apply as early as April 3 at some banks and that fundings have already occurred,” he wrote.
Henry said there was one case he knows of where a carrier had been turned down by one bank and then went to a smaller bank. “But I have not heard of anybody being declined outright yet.”
The biggest PPP grant he’s seen so far is $5.3 million, Henry said.
“It was a different story a week and a half ago, when nobody really knew,” Henry said. While there have been “hiccups,” Henry said the money that a number of companies have received “may have saved them from calling it quits.”
As far as he can tell, Henry said “everyone” has applied.
While there has been significant focus on PPP, there has been less attention paid to the expansion of an existing program that can aid businesses – the Economic Injury Disaster Loan (EIDL) package.
The EIDL, administered by the SBA, can provide up to $2 million “to help meet financial obligations and operating expenses that could have been met had the disaster not occurred.” A company needs to be in a disaster area to be eligible, but that isn’t an issue following the declaration of a national emergency because of the pandemic.
Interest rates on the loans have been reduced and the term for repayment has been extended. One other aspect of the EIDL loan is that it comes with a quick $10,000 grant to help keep a company alive during the time the SBA is considering the loan application.
The legal consulting company JD Supra said an EIDL loan actually is more likely to be approved quicker than a PPP application. However, there are collateral obligations that come with an EILD loan that aren’t in a PPP grant.
But that is not what Rybicki is hearing. “The SBA is not used to originating loans on its own, so this process is not working effectively,” he said of the EIDL process. “We have had clients submit applications in late March and they still have not received any information from the SBA on their application other than a confirmation of receipt.”
A side-by-side comparison of PPP and EIDL published by the law firm of Sherman & Howard noted several advantages of a PPP loan. For example, much of it will be forgiven if it is used for the designated cost areas of payroll, mortgage, rent and utilities. The costs to be covered by EIDL are listed as “working capital, inventory, equipment purchases, real estate payments and other operating expenses.”
Prasad Sharma, an attorney with the law firm of Scopelitis, Garvin, Light, Hanson & Feary said the $10,000 grant, which is an expansion of the EIDL program, would not need to be repaid even if the loan is ultimately denied. “However, due to the crush of applications, it is our understanding the grants are not necessarily being provided within that time-frame,” Sharma said in an email exchange with FreightWaves.
A borrower can get both a PPP and EIDL loan.
Rybicki of CLA said of the EIDL process, “it seems to be bogged down due to the attention the SBA is paying to the PPP.”
The other expansions of the EIDL program, Sharm said, include the elimination of a personal guarantee on advances of $200,000 or less; a requirement that the business be in existence for a year; and elimination of the requirement that the applicant couldn’t find credit from any other source.
Although the PPP is designed to protect payroll, FAQs on the program have made it clear that it is eligible for sole proprietorships. An independent owner-operator with one truck can apply. Given that, one observer who wished not to be identified said he did not think there was any reason for an independent owner-operator to apply for an EIDL. The PPP should take care of their needs.
Todd Amen, the president and CEO of driver advisory and research firm ATBS, said his firm has worked with about 5,000 owner-operators on the application process for aid under CARES. “We are learning more every day, but as of right now, the PPP appears to be the instrument of choice and the one flowing,” he said in an email to FreightWaves. “The PPP is ideal for the moment as best we can tell.”
Henry said he observed quick movement to get applications in. “Even the ones who typically are slower to act on things have applied,” he said. Henry noted that the PPP grants are “first come, first serve, so there is a feeling that if we don’t do it now, it will be all used up.”
(Editor’s note: the story has been revised to reflect that the $10,000 loan under EIDL does not need to be repaid if the full loan application is denied.)