A worker sewing mattress parts at Pleasant Mattress in Fresno. Photo contributed.
Written by Frank Lopez
In May, the Paycheck Protection Program (PPP), meant to help employers get people back to work, surpassed $510 billion in lending.
Headquartered in San Diego, California Bank and Trust (CB&T), has been processing loans for small businesses, helping them maximize the possible benefits of federal loans.
CB&T, which has about 90 branches statewide, including two in Fresno, has successfully processed 8,382 loans that totaled a combined $1.62 billion, with clients reporting that they preserved payroll for a total of 138,373 jobs across the state.
Over 90% of the loans were made to businesses with fewer than 50 employees, with the smallest loan being $500, and the largest reaching $10 million — the limit.
For the Fresno area, CB&T has helped preserve 4,000 jobs and processed nearly $47 million in PPP loans.
“We put together a Herculean effort on the fly to process as many PPP loans for our customers as we could,” said David K. Bale, executive vice president at CB&T. “We had approximately 20% of our workforce basically working day and night to get as many of these applications served as we could.”
Bale said that businesses should still consider the suite of U.S. Small Business Administration loan products and talk to their banks to see what could be the best fit.
Last week, the Treasury Department released new guidelines regarding the SBA’s PPP loan forgiveness details, which now provides a “safe harbor” from audits or penalties for businesses that received a loan under $2 million dollars.
Before the release of the new guidance, it was unclear just what exactly qualified as “economic uncertainty” for a business during the pandemic. Business owners were worried that they would be subject to audits and penalties from the SBA or the Treasury under the “good faith” certification requirement that precluded borrowers who had other options for loans.
“SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans,” according to the Treasury website.
Bale said that he is aware of reports from across the country where employees would rather collect richer-than-normal unemployment benefits than work, making it a challenge for businesses to get their payroll levels to where they were before the crisis.
They also have until June 30 to restore their payroll levels for the loans to become forgivable, which has many borrowers concerned, as does the requirement that 75% of the funds be spent on payroll, with the remaining 25% for other expenses.
Pleasant Mattress in Fresno is one of the local companies that had loans processed through CB&T.
Rion Morgenstern, president and CEO of Pleasant Mattress, which manufactures mattresses, said when the COVID-19 pandemic was first spreading, it created a really unstable business environment.
When the first shelter in place orders were announced, Morgenstern said that the company had been preparing on what do for the week prior. It immediately furloughed everyone at the company except for Morgenstern and three others in the finance department to keep cash flowing with accounts receivable, processing payroll and paying vendors.
Luckily, Pleasant Mattress is considered an essential business and employees were able to get back to work.
Though Morgenstern declined to say how much the company received, it was enough to keep employees on the job.
Pleasant Mattress received its loans during the second round of PPP loan distributions, which started at the beginning of the end of April.
“You really don’t know when your funding is going to hit,” Morgenstern said. “For a company like us, where we had a substantial amount of employees on furlough, you can’t all of a sudden flip a switch and bring them back on the next payroll period.”
Morgenstern said it wasn’t safe to bring all employees back all at once, and because there isn’t much demand for mattresses during the crisis, there was not a lot of work for many to return to.
Along with doing their normal work tasks — producing mattresses, clerical work, etc., staff are also working on projects during off hours to make sure they get enough hours to meet payroll levels.
As more people are coming back to work, the company is splitting its daily work day into two shifts to make sure there are not too many people on the floor at one time, which requires extra management overhead, as well as increasing costs and expense to run the factor for 20 hours.
Morgenstern said that he had about three employees that didn’t want to come back to work, with some of them making more from unemployment benefits.
Treasury Secretary Steven Mnuchin said on Tuesday that workers who reject an employer’s offer to return to work could lose their unemployment benefits under the PPP.
Morgenstern said that the forgiveness aspect is one of the most challenging parts of the loan, with economic uncertainty leaving business owners not knowing if businesses could return to pre-Covid levels.
“Let’s say we got $1 million (in loans), and we spend $750,000 on payroll, and 25% on other things as prescribed, and for some reason 10% of our employees won’t come back to work, then there is a 10% reduction in the amount of forgiveness that we get on the loan,” Morgenstern said. “That means money that we spent in the right way to keep people employed, we don’t get any of those dollars.”
While the focus of the devastation of Covid-19 has been on the business community, non-profits could be hit particularly hard during the pandemic.
Near the end of March, coalitions of nonprofits together with the National Council of Nonprofits, issued a letter to Congress requesting a $60 billion emergency fund to support the nonprofit sector in serving communities affected by the pandemic.
According to the letter, nonprofits employ 12 million U.S. workers.
The Art of Life Cancer Foundation is a local non-profit that connects cancer survivors, or those recently diagnosed, together through artistic creation to produce relationships and support and provide hope for a fulfilling life after surviving cancer.
One of the organizations most notable programs is the Art of Life Healing Garden inside Woodward Park, which features works of art by local cancer survivors, outdoor musical instruments, children’s playscapes and more.
The Art of Life Cancer foundation also had its PPP loans processed by CB&T and received its loan during the second round of funding.
The foundation received $30,600 in PPP loans and Joan Hensleit Minasian, board chair of the foundation, said they were planning on how to operate whether they got funding or not.
“We just went through all the different possibilities, and then how are we going to keep reaching people in the community, reaching out to cancer survivors,” Minasian said. “Right away we just put a couple of plans that we could implement, whether or not we got the PPP.”
Minasian said that CB&T provided a more personal relationship than a major bank they were previously working with, which really helped the foundation navigate through the funding process.
Minasian, who also does some nonprofit consultation on the side, said that a lot of smaller sized nonprofits have no reserve in the bank, and a crisis such as the ongoing pandemic may close the doors of many.
“With the PPP, I think we are going to be fine, but not everyone has the savvy to think it through on the fly,” Minasian said. “Nonprofits tend to land on their feet, but it’s going to be kind of rough for a lot of these smaller ones who haven’t had any kind of reserve in the bank.”