LAGRANGE — From the moment the new federal Paycheck Protection Program was announced by the federal government, the phones at Farmers State Bank in LaGrange started ringing, calls from local business owners interested in the program.

While the program took a couple of weeks to be fully understood, once it was fully in place, the $350 billion the government allotted funds for the program started flying out of the door of banks like Farmers.

“We had some real money going out the door here,” said Joe Urbanski, president and CEO of Farmers State Bank in LaGrange.

As the area’s traditional SBA loan provider, FSB was on the ground floor when the program was announced. Urbanski said the bank’s staff immediately started talking with local business owners, filling out the paperwork and internally approving loans as they waited for the SBA to earmark those federal monies to specific loans.

Nationwide, the SBA estimated that more than a million of the nation’s 30 million small-business owners applied for PPP loans.

“It’s not surprising that a loan that potentially doesn’t necessarily need to be repaid is a popular instrument,” Urbanski said.

The PPP provides monies guaranteed by the SBA for small businesses to keep workers on the payroll. Under the rules for the program, the SBA will forgive those loans if the companies that borrowed the cash keep their employees on the payroll for at least eight weeks, and that the money was used to meet payroll, rent, mortgage interest, or utilities obligations.

Initially, the program was slated to remain open until the end of June, but the demand was so great, the initial $350 billion was loaned out across the country in just a few days.

Urbanski said Farmers made about 275 PPP loans at an average of about $100,000 a loan. He said that amounts to about 50% of the commercial loans that the bank would normally approve in a normal year.

“That’s close to $30 million we expect will be injected into our footprint here, just through Farmers State Bank,” he said.

Before any of that money could be handed out, FSB had to wait for the SBA to acknowledge each loan.

“Once we internally approve a loan, we ask the SBA to assign an SBA loan number to earmark the monies for that specific loan, and then we take up to 10 days to actually close the loan and get the money out of the door,” he said.

The volume of loan guarantees flowing through the SBA was about 10 times its average. Typically the SBA processes about 50,000 loans a year, according to its website, for a total of about $30 billion in SBA loans a year. In just the first round of the PPP, the SBA estimated it guaranteed about 1.6 million loans.

“Right now, there is nothing to request because the program is shut off, it’s capped out,” Urbanski said. “We’re waiting to hear when it gets turned back on, and if it gets turned back on, we’ll start accepting new applications.”

The House of Representatives overwhelmingly passed a $484 billion spending package Thursday extending the act. President Donald Trump signed the bill on Friday. The legislation, approved 388-5, would restart a small-business loan program that was swamped by the demand.

Despite the program, unemployment is still soaring across the country. The U.S. Labor Department announced that 4.4 million Americans sought unemployment benefits last week. More than 26 million people have filed jobless claims since the novel coronavirus knocked the U.S. economy down last month, beginning an economic downturn.

Urbanski said he expects that money from the second phase will be snapped up quickly as well.
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