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Jax Daily Record Thursday, Apr. 16, 202008:30 PM EST

VyStar CEO: Lawmakers say federal business loan program will be replenished soon

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The Paycheck Protection Program is out of money, but the city-VyStar loan partnership program isn’t.
by: Mike Mendenhall Staff Writer

VyStar Credit Union CEO Brain Wolfburg said April 16 he has received reassurance from Florida’s elected officials in Washington and Tallahassee that the federal Paycheck Protection Program will see more funding within “days to a week .”

 Washington lawmakers and the U.S. Small Business Administration officials announced April 15 the loan program designed to keep small business workers on payrolls during COVID-19 closures was out of money.

 “By law, the SBA will not be able to issue new loan approvals once the programs experience a lapse in appropriations,” U.S. Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza said April 15 in a joint statement.

 Businesses can apply for a PPP loan to reimburse up to eight weeks of payroll costs if all employees are kept on the payroll. 

 The program’s original $350 billion in funding was part of the federal government’s $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act signed by President Donald Trump on March 27. 

 Money from the SBA program is loaned through national and local financial institutions, banks and credit unions. 

Wolfburg said he has been on phone calls with Sen. Marco Rubio, R-Florida, and Gov. Ron DeSantis. He said Rubio offered a commitment to the financial institution that the PPP will be recapitalized.

“The additional funding for the PPP should be coming. They are committing to get that done,” Wolfburg said. “And if that does, these windows will open back up and we will continue to fund it the same as we have.”

VyStar still processing PPP loans

VyStar Credit Union will not stop processing PPP loans despite the lack of a deal on program funding, Wolfburg said.

Rubio, who chairs the Senate Committee on Small Business and Entrepreneurship, released a statement April 15 blaming Democrats for slowing the next round of PPP appropriation.

MarketWatch.com reported April 15 that U.S. House Speaker Nancy Pelosi, D-California, and Senate Minority Leader Chuck Schumer, D-New York, called for $100 billion in health care spending, $150 billion for state and local governments and money for food-stamp recipients to be added to the $250 billion requested by the Trump administration for the PPP.

Senate Majority Leader Mitch McConnell, R-Kentucky, indicated in a tweet April 14 he wanted a dedicated PPP funding bill.

Wolfburg said during one of his recent phone calls with a government official that he was told lawmakers expect the PPP will need more than $250 billion, although Wolfburg declined to say who made the statement.

“I’m not going to speak for the individual, but they believe they need even more than the $250 billion that’s being referenced now,” Wolfburg said. “If we open for $250 billion more, that, too, will be used up very quickly at this point.”

Thousands interested

VyStar processed 500 of the 1,000 applications it received for the PPP through the SBA and awarded $25 million to small businesses. 

Wolfburg said VyStar has interest in the program from another 5,000 to 7,000 companies and nonprofits.

VyStar was prepared to award $50 million to $500 million through the PPP program. Wolfburg said as the process improved, the Jacksonville-based credit union was considering opening PPP loans to nonmembers and nonbusiness partners, a move he says has been atypical from many financial institutions participating in the program.  

PPP awards are considered secured loans by federal regulators, so Wolfburg said VyStar did not put a cap on its PPP loan pool.

Wolfburg said early reports of businesses slow to access PPP capital was not a question of liquidity or funding.

He said VyStar initially relied on a third-party vendor to process PPP loan requests that was unable to keep up with application volume. 

The SBA’s electronic application transmittal process also was unreliable and the agency returned to a manual processing method temporarily, he said.

Wolfburg said he wouldn’t blame the SBA. In a nonemergency situation, he said it would have taken the SBA a year to put together the policies to govern the loan program and automation that the agency set up in days.

“Everyone in the community, rightfully so, is on edge, is anxious and is concerned. They need money for their small businesses to continue to pay people and keep people on payroll,” Wolfburg said. “As the SBA program hit some hiccups, people would get frustrated.”

VyStar is the fourth-largest financial institution in Northeast Florida with $9 billion in assets and more than 700,000 members. It is the 16th-largest credit union in the U.S.

Wolfburg said VyStar, which also is administering Jacksonville’s city-backed COVID-19 Small Business Relief Loan Program, had to make internal adjustments to ensure its member businesses were taken care of and loans were processed in a timely manner.

Between both programs, the credit union has moved 1,322 small business loan applications since March 30.

“We were a little bit behind the eight ball on some of our member service. We didn’t live up to our commitment to our members at that time, so not only have we put in robotics, but we’ve retrained and retooled about 40 to 50 of our staff from other departments to continue to serve small businesses until we get through this,” Wolfburg said.

City-VyStar loan partnership

Wolfburg said that as of 8 a.m. April 16, VyStar has approved 240 loans through the city-backed program for $8 million. The credit union has received 330 applications totaling $13.7 million.

Small businesses can apply for loans up to $100,000 through a line of credit. The goal is for approval within five days. 

VyStar made a $50 million loan pool available for the program and there have been no talks between the credit union and the city about expanding it.

To make more money available, Wolfburg said it would require a second request and an additional monetary guarantee by the city.

“We have a long way to go on businesses asking for additional funds before the city’s commitment would be even tested,” Wolfburg said. 

City Council approved up to $26 million for the six-year COVID-19 Small Business Relief Employee Retention Grant Program to provide additional interest and principal forgiveness for businesses that meet specific employment retention criteria. 

VyStar began processing applications for the program March 30 and Mayor Lenny Curry signed the legislation creating the loan and grant program April 7.

The average loan award has been $35,000, and Wolfburg said requests spanned industries from restaurants to home and commercial HVAC service providers, day cares and retail stores.

Curry said in his daily COVID-19 news briefing April 16 that 70% of businesses that applied for the city-backed VyStar loan have been approved.

“These numbers sound great, but remember, there are faces and real people behind these numbers,” Curry said.

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