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Paycheck Protection Program Benefits Montana Businesses; Which Ones Is Unclear

A photo of Sweet Peaks Ice Cream shop taken on June 10, 2020
Rachel Cramer
Yellowstone Public Radio
Sweet Peaks Ice Cream Shop in Bozeman, photographed June 10, 2020.

Many economists say the federal Paycheck Protection Program (PPP) has helped prevent broad economic collapse in the U.S. But they say transparency will be key in understanding how well the program actually worked. Yellowstone Public Radio News’s Nicky Ouellet spoke with Rachel Cramer who’s been reporting on the PPP in Montana and new rules to make it easier for borrowers to qualify for loan forgiveness.

Nicky Ouellet: Rachel, thanks for sharing your reporting with us today.

Rachel Cramer: Thanks for having me, Nicky.

NO: So how many loans through the Paycheck Protection Program were approved in Montana?

RC: The latest U.S. Small Business Administration (SBA) report shows over 22,000 loans worth more than $1.7 billion as of June 6.

NO: Woah, nearly $2 billion coming into the state from this program, do we know where that money is going?

RC: Anecdotally, yes, but when I went looking for a breakdown business by business, it doesn’t seem like anyone is keeping track at a statewide level. I talked to Wendy Stock; she’s a professor of economics at Montana State University who studies the impacts of public policies and regulations in areas like the labor market and education, and she says a massive program like this needs transparency.

“It’s really important to make sure that we have accountability and that we have oversight of these programs so that we know where they’re going, and even more importantly, we need to be able to assess how well the program worked, and that means that we’re going to need to know what businesses get loans; how well were they able to keep their employees on payroll," Stock said.

There was also a lot of criticism when reporters found some large companies had been able to tap into the more than $600 billion program, which was intended for small, struggling businesses, not Shake Shack or the Los Angeles Lakers.

NO: So where are you finding information about where that money is going in Montana?

RC: Brent Donnelly with the SBA Montana Division said more data would need to come from the federal level.

“Loans that are approved, are in the SBA system, but we’re not able, at least at the local level, to access that data,” Donnelly said.

Businesses and nonprofits apply for PPP loans at a bank or credit union. If the lender approves the application, the lender uploads it to the SBA Montana Division’s online portal. The Montana division checks to see if federal funding is still available, and if it is, staff send the money to the lender, which sends the loan to the business or nonprofit.

The Montana Bankers Association and Montana Independent Bankers Association said they weren’t collecting information from their members about PPP loans.

Tracie Kenyon, President and CEO of Montana’s Credit Unions, had the most information to share. The ten credit unions with SBA lender approval reported 675 PPP loans totalling over $24 million as of May 18.

The smallest loan was for $580 through Sky Credit Union, which serves Gallatin, Park and Sweet Grass counties. Kenyon said it went to a therapist who had just opened a practice.

“That $580 loan really speaks to my heart because you can see that the smallest businesses were impacted by COVID-19, and this program was able to help,” Kenyon said.

Sky Credit Union also approved the largest PPP loan out of all the credit unions in Montana. A print shop with around 180 employees received $4.3 million.

Kenyon said that was an outlier. Most were less than $100,000.

Some of the credit unions also provided details about the types of businesses served.

“Agricultural support, farming, crop duster, oil field, those kinds of things were happening more on the eastern part of our state, and then on the western part was more, you know, attorney, counseling services, title companies, those kinds of businesses,” Kenyon said.

The most recent U.S. SBA report said the top five sectors nationwide to receive funding through the PPP were health care and social assistance, professional, scientific and technical services, construction, manufacturing, accommodation and food services.

NO: So some questions about specifics of where this money is going.

RC: Yes, and, you know, Wendy Stock, the professor of economics at MSU, said overall, the PPP is doing what it was created to do.

“It’s got its warts. It’s not perfect. But in terms of keeping businesses afloat, which is the key to having the economy recover, PPP is something that’s helping us,” Stock said.

Stock said one of the big issues with the PPP was that it bumped up right against another program that was put out at the same time as the extension and expansion of unemployment insurance.

“On the one hand, we saw the PPP encouraging businesses to keep their employees on payroll, but on the other hand, you had this expansion in unemployment that was creating the exact opposite incentive,” Stock said.

She was referring to the expanded unemployment benefits with funding through the CARES Act. Stock said an extra $600 a week, especially in places like Montana where incomes are typically lower, a lot of people could earn more being laid off. She said it was hard for businesses to navigate these conflicting policies.

But the bump in unemployment benefits is set to end on July 31 under the current legislation. Recent changes to the PPP may help more businesses qualify for forgivable loans.

Stock said this could have a positive rippling effect through the economy.

NO: This is in reference to Congress recently extending the terms of the loans, which President Donald Trump signed into law on June 5.

RC: That’s right.

NO: What specifically do these new rules mean for small Montana businesses?

RC: Originally, borrowers needed to use 75 percent of the PPP loan to cover payroll and benefits during an eight week period.

A lot of small business owners, especially those in the restaurant industry, said they had a hard time spending that much of the loan on payroll because they didn’t have enough work for all of their employees during state wide shut downs.

With the new rules, just 60 percent of the PPP loan needs to go to payroll. That means more of the funding can be used to cover rent, mortgage interest and utilities. The window of time to use the loan was also extended, from eight weeks to 24.

Under the old rules of PPP loan forgiveness, business owners had to maintain the average number of employees as of Feb. 15 and pay them the same rate by June 30. With the new rules, that date has been pushed back to Dec. 31.

NO: What happens if businesses don’t qualify for loan forgiveness?

RC: The new rules let businesses pay the low interest loans back in five years rather than two.

I talked to Marissa Keenan who launched Sweet Peaks Ice Cream with her husband 10 years ago. They have shops in Whitefish, Kalispell, Missoula and Bozeman and then a fifth location in Spokane, Washington. On Mar. 19, they closed all of the shops in response to rising COVID-19 cases.

She said the PPP loan they received in Apr. has helped them pay their core staff, rent and utilities and that the extended window of time to use the loan is good for businesses like hers.

“Increasing the amount of time in which you can spend that money and still have forgiveness is incredibly helpful. It’s incredibly helpful for us but especially for businesses that aren’t even open yet,” Keenan said.

Sweet Peaks gradually reopened some of its Montana shops in May, but she said the location in Spokane is still closed since there have been more COVID-19 cases there.

Keenan said she’s confident their PPP loan will be forgiven and has a positive outlook for the summer.

“It makes me feel like, OK, we can get through this. Ice cream brings joy to people, and we all need a little joy in our lives,” Keenan said.

The deadline to be approved for a PPP loan is June 30. Right now there’s more than $100 billion left in the federal funding pool.

NO: Thanks for sharing your reporting, Rachel.

RC: Thanks, Nicky.