Some Massachusetts banks have received applications for Paycheck Protection Program loans in the first few weeks of this year equivalent to half of the loans they processed in all of 2020.

Community banks have seen high demand for loans in the opening weeks of the Paycheck Protection Program’s latest round. Despite encountering a few struggles, lenders report a smoother process compared to the program’s initial launch last year. 

“It really doesn’t have any of that feel of the first and second weeks of April last year where there was almost a panic in the marketplace,” said Jeff Sullivan, president and CEO of Springfield-based New Valley Bank. “Everybody thought the funds were going to run out, and people were hearing horror stories about loans not getting processed – you really just don’t hear that now.” 

Massachusetts small businesses have received 22,707 loans in the latest PPP round as of Jan. 31, nearly 20 percent of the loans processed between April and August last year. With $2.25 billion in funding so far for Massachusetts businesses and an average loan size of about $99,000, lenders say the money seems to be reaching the businesses most in need. 

Congress allocated $284 billion more to the U.S. Small Business Administration program as part of a new economic aid package in December.  

Small Frustrations 

While the launch of the program last year was marked by confusion and chaos, lenders this year have found a smoother process. But banks have encountered a few issues. 

The SBA is taking more steps to identify potential fraud before approving PPP loans. Sullivan said the SBA has been flagging applications for potential problems – such as clarity needed around Employer Identification Numbers or addresses. Figuring out the problems requires some research by the bank staff, Sullivan said, but the issues usually get quickly resolved. 

“That’s a little bit frustrating, but it’s not even a fraction of the anxiety that the customers experienced at the outset of the pandemic,” Sullivan said.  

Rita Janeiro, senior vice president for community banking at Hudson-based Avidia Bank, said the SBA’s additional due diligence has caused some consternation for borrowers as they wait to have discrepancies explained and cleared. Otherwise, she said, the process has gone smoothly. Avidia Bank, which processed about 1,700 PPP loans in 2020, has already received more than 600 applications. 

Webster Five processed PPP loans manually in 2020. After signing on for Lenders Cooperative and Summit Technology’s PPP forgiveness platform, the bank decided to use the company’s application portal for this round of funding, said Christopher Watson, the head of Webster Five’s business banking division. While the technology has made for a better experience for customers and bank staff, the system needs to be updated each time the SBA changes its guidance, which happened several times after the program reopened a few weeks ago.  

“That seems this week to have slowed down finally,” Watson said. “For the first couple of weeks every morning you’d wake up and see that they changed something.” 

Businesses in Need 

Since the latest round of funding opened in January, the SBA has approved about 891,000 loans worth $72.74 billion and an average loan size of $81,635, according to data published weekly by the SBA. Last year the average loan size was about $101,000. 

Small businesses that received loans last year are eligible for another one for up to $2 million if they have no more than 300 employees and a 25 percent revenue reduction when comparing one quarter in 2020 to 2019. Nearly 75 percent of the loans through Jan. 31 have been for these second–draw loans, with the SBA approving more than 664,000 loans totaling $67.95 billion for an average loan size of about $102,000.  

Smaller businesses with 10 or fewer employees have received most of the second–draw loans. These smaller companies have received 482,000 second-draw loans for an average loan size of about $35,000. The SBA also gave community financial institutions, including Minority Depository Institutions and Community Development Financial Institutions, exclusive access to the program when it reopened the week of Jan. 11 to help minority-owned and other underserved businesses that struggled getting loans last year.  

Businesses in the service industry, especially hospitality, have made up much of the second-draw loans, said Timothy Bombard, executive vice president and chief lending officer with East Cambridge Savings Bank. He said some businesses in other industries have missed out on second-draw loans because revenues did not fall enough to meet the 25 percent revenue reduction. 

“If we go back to what the genesis of the program really was – which was just to keep the businesses open, provide enough until the pandemic is over and behind us and the economy starts growing and opening again – so far, my experience has been that it’s working that way,” Bombard said. 

Firms Still Seek First Loans 

Even with 5.2 million loans nationwide and 118,000 in Massachusetts last year, some businesses are taking their first PPP loans in 2021.  

Diane McLaughlin

East Cambridge Savings Bank has processed about 300 PPP loans so far, about half what the bank did in 2020. Bombard said about 30 percent of those loans have been first-draw loans, with the majority of those to sole proprietors.  

Watson with Webster Five said the bank has done only a few loans over $1 million so far, adding that the majority of the second-draw loans have been for less than $100,000. He said many of the businesses that applied for loans in a panic at the start of the pandemic have been able to survive thanks in part to the PPP loan received last year. Webster Five even saw a decline in businesses using lines of credit in 2020, Watson said, a sign of the PPP’s effect.  

Correction 1:35 p.m., Feb. 8, 2021: This story has been updated with new information from Webster Five to clarify that the majority of the second-draw Paycheck Protection Program loans the bank have processed have been for less than $100,000.