'Self-Certifying' Federal COVID Loan Program Benefits Many Vermont Companies
A recently released database shows that some 12,000 Vermont companies – some with very ample balance sheets – received low-interest, forgivable loans under the Paycheck Protection Program.
The program was created quickly by Congress, just weeks after the COVID-19 pandemic shut down many businesses around the country. The initial $349 billion program was later extended with additional funds into early August.
The massive infusion of federal money was aimed at helping companies re-hire laid off workers. If companies brought back most of the workforce within a certain time period, the 1% loans would be forgiven and turned into outright grants.
Seven Days has assembled a searchable site of all the Vermont recipients. The list includes a who’s who of local companies, large and small, for profit and non-profit, including Vermont Public Radio, which received a $960,000 loan.
Among the recipients are Trapp Family Lodge, Darn Tough Socks, Smuggler’s Notch ski area and Dubois Construction, Gov. Phil Scott’s former company, which got a loan worth $150,000-$350,000.
The bulk of the loans were not large; about two-thirds were for less than $50,000. According to the Seven Days database, just seven companies got between $5 million and $10 million. The high-dollar recipients include Bennington College, Copley Hospital, GW Plastics and PC Construction.
Both the lending criteria and the loan forgiveness requirements in large part rely on the honor system. Chris D’Elia, the president of the Vermont Bankers Association, said the program was stood up very quickly, without the scrutiny banks typically give to borrowers.
“That is one of the most unusual aspects of this program,” he said. “You know, with traditional lending, you’re looking at underwriting criteria, ability to repay, financial stability, all those good things you would underwrite a loan with. In this case, you were accepting an application from a borrower; they were self-certifying the circumstances that they were facing. All of the data was self-certified.”
"In this case, you were accepting an application from a borrower [and] they were self-certifying the circumstances that they were facing. All of the data was self-certified." — Chris D'Elia, Vermont Bankers Association
D’Elia said the same self-certification approach will be applied with the forgiveness piece.
“They [the borrowers] are going to fill out an application and once we get that application, it’s going to be uploaded to the SBA system. SBA will, I imagine, do some due diligence. But again, we expect we’ll get information back from the SBA that says ‘X amount of dollars are forgiven on this loan.'”
D’Elia said there's still uncertainty around the loan forgiveness part. D'Elia said his members and other banks around the country would like to see the federal government forgive the first $50,000 of all PPP loans to reduce the loans the banks have to carry on their books.
“We're still waiting on some guidance as to how a lender actually files the paperwork with the SBA in order to proceed with that forgiveness portion,” he said. “So I think you had initial guidance that said one thing, then you had things changing over time, and that creates the uncertainty and the frustration.”
Companies also did not have to show that they really needed the money. Around the country, institutions with a lot of money – such as private prep schools – are getting the federal help. In Vermont, Burr and Burton Academy in Manchester got between $2 million and $5 million, according to the records. Tax forms they filed with the IRS show the school had some $41 million in investments in 2018.
D’Elia said companies that are very well capitalized were completely within their rights to apply, although some – like Green Mountain Power – withdrew their request after the SBA tightened guidelines.
“I think, as we saw, the scrutiny over time became unbearable, if you will, for some of those companies who decided to return the funds,” he said. “But if you look at the first roll-out of the rules, they weren’t doing anything in violation of the program. That’s the way it was set up.”
While the PPP program helped a wide variety of companies, D’Elia says many restaurants did not apply because of the program’s “once size fits all” design, which required companies to say when they would re-open or rehire workers.
"You've got a lot of unique operations out there, retail, restaurants, lodgings and so on... not knowing when they could open their doors or start to generate income. So I think that's why the PPP program was a bit more difficult for them and not perhaps as useful." — Chris D'Elia, Vermont Bankers Association
“You've got a lot of unique operations out there, retail, restaurants, lodgings and so on… not knowing when they could open their doors or start to generate income,” he said. “So I think that's why the PPP program was a bit more difficult for them and not perhaps as useful.”
But for many companies the loans helped them survive a two month shutdown. SunCommon, a nine-year-old solar company based in Waterbury, furloughed almost all its 180 employees when the pandemic hit.
Co-president and founder Duane Peterson said the $2.6 million PPP loan was a lifeline when they really needed it.
“That outside capital is what allowed us to restart and bring back the bulk of our employees, and get back to business in this strange new world,” he said.
"That outside capital is what allowed us to restart and bring back the bulk of our employees, and get back to business in this strange new world." — Duane Peterson, co-president, SunCommon
Around the country, the solar jobs industry cut 65,000 workers due to COVID-19. SunCommon was unable to rehire 28 people, 22 in Vermont, primarily in its marketing department. Peterson said some of their marketing focused on public events such as energy fairs and film festivals, which are no longer possible.
“Some of the jobs literally evaporated,” he said. “This last winter, we staged a climate action film festival. We packed film houses all around Vermont and up and down the Hudson Valley. Well, that’s actually illegal. We can’t do that work now. And so the people who had those good jobs, their jobs evaporated and we had to send them away, and that just really sucks.”
Peterson hopes that the PPP loan will still be forgiven, since SunCommon was able to hire back all but 16% of its pre-COVID workforce.
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