More than $400 million in forgivable loans have been approved for at least 1400 businesses in Maine, under the federal "Payroll Protection Act" that went into effect less than a week ago. But some businesses and nonprofits are worried that they will be left behind, or might not be able to access the full benefit — unless they actually pay people to not work.
Together, the payroll protection program and another low-cost Small Business Association disaster loan fund represent an extraordinary effort to keep the nation's economic engine fueled up, even as it runs at "idle” while the worst of the pandemic passes through.
In Maine, bankers have spent the last week trying to push their customers ahead of the curve.
"It's been well advertised that this is a limited pool of money, and it's going to be distributed on a first-come-first serve basis," says Larry Barker, the CEO of the Machias Savings Bank, which, by Tuesday, won loan approvals for hundreds of clients.
"Over the weekend our teams worked diligently, we received approvals for $37 million worth of these loans. As of today that number is $60 million, we have another approximately $40 million in the pipeline for a total of $100 million and more coming in by the day."
The SBA assistance could be a savior for business people such as Damariscotta River oyster farmer Bill Mook. He furloughed more than half his workers last week. But he'd already been frantically researching what kind of assistance he might be able to access.
"I wound up applying for both the economic injury disaster loan and the payroll program protection loan. I am not sure which I will take."
But Mook says he is likely to stick with the new payroll protection program, which can finance up to eight weeks of a company's usual payroll, plus some other expenses as well. One issue that Mook and some other Maine businesses may face, though, is a requirement that to qualify for the maximum forgiveness of the loan, they will have to put all of their employees back on the clock by June 30.
"If worst comes to worst, and we can't bring people back, in the worst-case scenario, we would have to pay some portion of that back and we have two years to do that at 1 percent, so that's the gamble we're taking."
Or companies like Mook Sea Farm simply could start paying their full staff, whether or not there is actual work for them to do. That's according to the Maine District Director for the Small Business Administration, Amy Bassett.
"Give them paid leave basically, right? Is that an option? I don't know that it's not an option at this point. They have to document that they are paying people, and that's sort of where the guidance is that we have right now."
The idea runs against the grain for Mook. But he says he can't reject it out-of-hand.
"It certainly has floated through my mind. It goes against every business bone in my body, which is you try to make sure your business and your payroll and your expenses are in line with what you believe your income is going to be."
Maine's businesses are beset by such uncertainties — from when markets might bounce back to how, exactly, the federal programs will be administered and funded. The SBA's Amy Bassett acknowledges that guidance is changing quickly and that businesses may have to make some decisions without guarantees.
For instance, while a huge number of PPP loans have been approved in record time, the federal government has been slow to provide closing documents needed to actually deposit funds in a customer account. Basset says some banks aren't waiting.
"Some of the banks we've spoken to are moving forward with disbursements. There still is a little more clarification needed from SBA so some are waiting for the further guidance."
The nonprofit sector, which accounts for one in six jobs in Maine, is looking for some guidance, and more robust assistance, as well. Naomi Beal is the sole paid employee of "PassivehausMAINE," a 501-C3 organization that promotes the construction and renovation of energy-efficient housing in Maine.
Beal says her bank is not on the list of lenders that have been pre-approved by the SBA, and when she tried to get help from other pre-approved banks, they were already swamped serving their existing customers.
"We, because we don't have an account with a bank that's SBA-approved, are kind of stuck where it's not clear what our options are, just through some bad luck."
There is also some confusion about the treatment of the many small business owners in Maine who take part of their compensation from payroll, and part from what are called owner-distributions. Peter Courand and his father own a 12-person contracting company in Searsmont. He says about half his income is at stake.
"That is not approved currently. So we won't be able to access any of those funds for our own paychecks, although we will be able to hopefully pay our employees if we have to shut down. Luckily we're not shut down at this specific time."
Courand says he did apply for the traditional SBA economic injury disaster loan as well, which can provide $10,000 up front for capital expenses, and more through a low-cost, long-term note. He was one of many to try signing up last week, whose applications were voided after the SBA's website crashed. He is still waiting to find out whether that aid will be approved.
Originally published April 9,2020 at 3:50 p.m. ET.