Federal loans are a “godsend” for companies that guarantee them

The $ 349 billion initial funding for the paycheck protection program ran out within two weeks. | NIKCOA / Shutterstock

Electronics recycling companies and other processors across the country are turning to a federal aid program to help them overcome cash flow problems caused by the coronavirus. Some have been successful, but others face banking complexities and depleted funding.

The Paycheque Protection Program (PPP) was spear this month by the Federal Small Business Administration, as part of the CARES (Coronavirus Aid, Relief, and Economic Security) Act that was approved by Congress in March.

The program, which was originally endowed with $ 349 billion, offers businesses a loan designed to keep their employees on the payroll. However, the funds were exhausted within days and Congress is now working on legislation to fill the coffers.

Some electronics scrap companies were approved in the first round of funding – and they are grateful for the relief the federal aid will bring.

“Having this program was a godsend,” said Robin Ingenthron, owner of American Retroworks, which operates a recycling plant in Middlebury, Vermont.

Billy Johnson, chief lobbyist for the Institute of Scrap Recycling Industries (ISRI), said many members of the organization applied for loans and received them quickly, “depending of course on their banks and lending institutions. “.

ISRI advised its members to “immediately contact their lending institutions and prepare the forms to obtain these loans” once the CARES law is passed, Johnson added.

E-Scrap News spoke to various recycling companies who have applied for PPP loans in recent weeks. They reported mixed results, with many agreeing that success is largely due to the timing and relationships the candidates had with financial institutions.

The loan offers a “best scenario”

Under the PPP loan, businesses that keep their employees on the payroll for eight weeks after receiving the loan and use the money according to SBA guidelines on payroll, rent, mortgage interest, or utilities will have the entire loan canceled at the end. of the eight week period. Businesses work with their own bank to seek help.

The program began receiving applications from small businesses, nonprofit groups and other entities with fewer than 500 employees on April 3. The $ 349 billion was quickly allocated to nearly 1.7 million applicants across the country and on April 16 the program was closed to new applications.

But Senate lawmakers on April 21 adopted the “Paycheck Protection Program and Health Care Enhancement Act”, provide additional funding for PPPs and other coronavirus relief efforts. Treasury Secretary Steven Mnuchin said the legislation gave an additional $ 310 billion to the PPP. The plan was due to be voted on in the House of Representatives on April 23.

However, some recycling entities were able to obtain loans during the first wave.

Frederick, Md., Electronics recycling company e-End has been approved for a six-figure loan under the program, a substantial boost for the business. In March, e-End closed its processing plant to ensure the safety of employees and customers. The company plans to reopen once security threats from the pandemic have passed.

“The way the program was designed worked perfectly for us. “
–Steve Chafitz, president of electronic recycling company e-End

Without the PPP funds, e-End would have had to dip into its cash reserves to continue paying its employees, said company president Steve Chafitz.

“Obviously this is something we didn’t want to do because there was no income to make up for it,” he said.

With the funding, e-End is able to continue paying its 20 employees even if the facility is down, as well as paying rent and utilities.

The story of the Maryland recycling company sheds light on another side of the PPP process: In some cases, the experience has turned out perfectly. The company submitted documents on April 4 and was approved for the loan two days later.

“The way the program was designed worked perfectly for us,” said Chafitz, noting that his good relationship with his bank, as well as the completeness of the information submitted with the application, helped speed up the approval.

The company received its PPP funds on April 13.

American Retroworks’ Ingenthron was among the first in his county to file his claim at his local bank, he said. The company was approved for a loan of $ 224,000, based on eight weeks of average salary costs from last year.

Before the payroll program, Ingenthron did some pretty gloomy contingency planning. The possibilities were similar to what the company anticipated in 2014 when it lost a big contract and in 2008 during the financial crisis, he said.

“There was definitely a scenario where we would go to Chapter 11 and use the remaining money we had to outsource whatever was left and leave the factory clean,” he said. “We’ve had that and worse scenarios, and that provides us with a better one.”

Ingenthron said it’s important for businesses to think about not only their own operations, but also the businesses they work with. He worked with downstream clients as well as with the owner of one of his facilities to help them apply for the program. It’s important to consolidate the activities that a business relies on, Ingenthron said.

The luck of the draw

Banking and timing played such a big role in the result that a plastics recycling operation described the PPP application process as much like a lottery.

“If you had the right relationship with the right bank that had their system in place to process and submit the request, then you were probably funded,” said Mark Shuholm, owner of Northwest Polymers, based in Molalla, in the Oregon, which processes scrap metal. plastics from manufacturers and other industrial sources.

Shortly after applying, Shuholm received an email from his bank telling him that there was no more money to lend. Due to overwhelming demand, high volume of requests and limited time, the bank was unable to process all requests before funding reached its cap.

“If you had the right relationship with the right bank that had their system in place to process and submit the application, then you were probably funded. “
–Mark Shuholm, owner of Northwest Polymers plastics processor

On the municipal recycling side, the nonprofit Eco-Cycle processor in Boulder County, Colo., Also encountered the intricacies of the application process and received no money.

The organization, which operates the municipal material recovery facility (MRF) in Boulder, banks with a credit union and this financial institution had to obtain approval to participate in the P3 program before accepting applications.

With the rapid evolution of federal government rules, the process of preparing to accept applications has taken longer than usual.

After the credit union was approved and the Eco-Cycle application was completed, the organization submitted it but was informed that the PPP money was missing, said Suzanne Jones, executive director of the organization for purpose. non-profit. She said the group would continue to explore loan options.

“We are ready, but we have not yet succeeded,” she said.

Jones said she understands that with more money likely to be cleared for the program, companies that fail in the first round may be reconsidered for funding.

Northwest Polymers’ Shuholm also aims to be considered in the next round of loan applications. He noted that his business is still in operation and his employees are in good health.

“As with everything else in this current environment, we are taking this in stride and will find a way to get through it,” he said. “I am impressed by the cooperative spirit and teamwork of all of our customers and suppliers. “

At the same time, however, the experiences of small businesses during this episode shed light on some in the banking industry. A recent Wall Street Journal article reported that approval of the application was not necessarily based on a company’s chances of surviving the pandemic.

“Whether a business is successful or not often depends on how and where it does its banking,” the newspaper reported.

In another indication of the power of banks in the PPP process, Wells Fargo faces trial alleging that the company has unfairly prioritized businesses seeking larger loans, rather than treating them on a first come, first served basis. Bank of America, JPMorgan Chase and Bancorp were also prosecuted.

Colin Staub, Jared Paben and Dan Leif contributed to this report.

A version of this story appeared in Update on plastics recycling April 22.

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