By Matt Glynn, originally published in The Buffalo News on Jul 2, 2020, 09:56.

With Paycheck Protection Program near an end, businesses take stock of its effects

Partners Packaging’s loan through the federal Paycheck Protection Program helped keep its business on firm ground during uncertain times.

With the help of the federal loan PPP loan, Systems Technology Group kept all of its employees on board. Now the company plans to add staff.

The application deadline for the federal program passed Tuesday, though it may get extended. After a rocky start in April — the initial supply of funds ran out within two weeks — the federal program to aid small businesses during the chaos of the Covid-19 pandemic provided loans to about 5 million businesses nationwide and pumped more than $1 billion in funding into firms across the Buffalo Niagara region.

Area businesses that took advantage of the loans to survive the shutdowns and disruptions are now looking ahead as Buffalo Niagara’s economy reopens.
“It really helped a lot of businesses do what the program was intended for, which was maintain payroll during a really volatile time, right in the midst of the shutdown,” said Rosa Pizzi, a partner at Phillips Lytle. “Businesses really cared about their employees and wanted to maintain their payroll as much as they could.”
 
The federal program gave employers an incentive to keep workers on the payroll and provided funds for covering other key expenses. If businesses meet the requirements for spending the funds, they can have the entire amount forgiven.

But the program also has been criticized over confusing rules, big businesses that managed to get the loans, and how quickly the initial $349 billion in funding was used up, before more funding was added. A Center for Responsible Lending official this week said the “structure, execution and rollout of the PPP fell short, creating barriers for small business owners of color to access relief.”
As the PPP application deadline passed, about $130 billion remained left over from the $310 billion in the second round of funding. The program may get new life. The Senate on Tuesday approved a five-week extension. The House has yet to act on the measure.

As lawmakers decide what to do next, local businesses and banks are taking stock of its effects. While the Small Business Administration oversaw the program, banks and other lenders were responsible for processing the applications.

Bob Cefalu, a co-owner of Partners Packaging in Buffalo, said a $115,000 loan gave his business the reassurance to hire a new sales and marketing employee, and to start a service to clean businesses like restaurants and barbershops. He is looking ahead at marketing that service to gyms, once they reopen.

“We’re not as worried about making sure our people are being paid while we’re going out and doing these other things,” Cefalu said. “For us, I think it worked ideally.”

Partners Packaging provides shipping and packaging supplies, wooden crates and janitorial products to businesses. The business, also owned by Andy Kurcsics and Judy Bakowski, has 14 employees and plans to add one more. The company expects its sales in the second half of this year to rise 10% to 15% from the same period as last year, Cefalu said.

Gary Kielich, president of Systems Technology Group in Blasdell, said his company’s $315,000 loan proved essential. “I think what PPP did was, it gave us confidence to be aggressive and invest in some emerging technologies.”
 
The business provides point-of-sale tech solutions to customers. Amid the pandemic, customers showed strong interest in contactless payment solutions and online ordering sites. “We really needed that, because nobody wanted to handle cash,” Kielich said. 
Kielich said he is impressed to see Systems Technology customers’ transactional volume bouncing back to the levels of last fall. “I can’t say it’s a perfect environment, but the resiliency of the Western New York economy and our customer set has been surprising,” he said.

The federal loan program generated a massive workload for participating lenders. During the first couple of weeks, banks were under pressure to submit customers’ applications quickly, as the initial allocation of funds was running out. Bankers worked late nights and weekends to complete the process.
 
Evans Bank processed about 1,700 PPP loans, for a combined $200 million. About 1,000 of those loans went to businesses that weren’t even Evans customers, said Kenneth Pawlak, Evans’ chief commercial banking officer.
 
“We wanted to be there for the business community, first and foremost, and provide an opportunity for people to get PPP loans that were maybe having trouble elsewhere,” Pawlak said. “We’re happy to say nobody was turned away.” Many of those transactions have turned into new customer relationships for Evans.

Pawlak said the federal money arrived at a crucial time. “Without it, there’s many businesses that simply couldn’t make it through these times. Nobody’s prepared to be told, ‘Hey, you have to shut your doors.’ ” Those funds, combined with the adjustments businesses made, allowed them to survive, he said.

M&T Bank in the Buffalo Niagara region secured and disbursed over $977 million in PPP funding for 5,279 small businesses employing nearly 104,000 people. Across all of M&T, the bank secured and disbursed over $7 billion in PPP loans. M&T reported that 82% of its loans were for less than $250,000.

Citizens Bank funded $15.5 million in PPP loans for 285 clients in the Buffalo area, who will retain 2,093 employees. Five Star Bank processed about 1,700 applications across Western New York, Central New York, and the Southern Tier, for about $270 million. Bank of America in the Buffalo area processed nearly 1,000 loans for a total of $83 million. About 70% of its loans were for less than $50,000, and 76% were for businesses with 10 or fewer employees.

Bank on Buffalo processed about 200 PPP loans for a total of about $50 million. KeyBank did not provide local statistics, but across the bank processed more than 40,000 PPP applications for $8.5 billion.

Pizzi, the Phillips Lytle partner, said two recent rules changes will help businesses achieve loan forgiveness, the next step in the process. The changes give businesses more time and more flexibility.

One change tripled the amount of time over which the funds must be spent, to 24 weeks from eight weeks. Another change reduced the percentage of the funds that must be spent on payroll, to 60% from 75%. Businesses can devote more of the funds to expenses like rent and utilities, if those represent a large percentage of their costs, Pizzi said.

“It’s going to help a lot of borrowers obtain the full forgiveness, which is obviously more helpful than having a loan that you continue to pay off,” Pizzi said.