How companies fare when looking for payday loans

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The initial $349 billion in funding for the Paycheck Protection Program ran out in two weeks. | NIKCOA/Shutterstock

Recycling businesses across the country are applying for a federal aid package to help them weather cash flow problems brought on by the coronavirus. Some have succeeded, but others face banking complexities and depleted funding.

The Paycheck Protection Program (PPP) was launched 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 initially endowed with $349 billion, offers companies a loan intended to keep their employees on the payroll. The funds ran out within days, but Congress recently passed — and President Trump signed — legislation funding the program with an additional $310 billion. The aid program resumed receiving applications this week.

Eco-Cycle, a nonprofit that runs the Boulder County Recycling Center in Colorado, is an MRF operator that applied for a loan — but was written off on its first attempt. The Eco-Cycle experience highlights one element of the aid program: approval in the first round was often just a matter of time.

Eco-Cycle banks with a credit union, and this financial institution had to obtain approval to participate in the PPP program before accepting applications.

With the federal government’s rapidly changing rules, the process of preparing to accept applications took longer than usual.

Once the credit union was approved and Eco-Cycle’s application was completed, the organization submitted it but was told the PPP money was missing, said Suzanne Jones, executive director of the non-profit organization. She said the group would continue to look at loan opportunities.

“We are ready, but we haven’t succeeded yet,” she said.

Resource Recycling has spoken to various recycling businesses that have applied for PPP loans over the past few weeks. They reported mixed results, describing how the success was largely down to timing and the connections the contestants had with financial institutions.

“The rules kept changing”

Under the terms of 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 public will see the entire loan forgiven at the end. of the eight-week period. Businesses work with their own bank to apply for assistance.

The program began accepting 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 closed to new applications.

But Senate lawmakers passed the “Paycheck Protection Program and Health Care Enhancement Act” on April 21, providing additional funding for PPP and other coronavirus relief efforts. The House of Representatives passed it on April 23, and President Trump signed it on April 24.

“Being able to cover the payroll for two months would be a huge advantage in times of uncertainty.”
–Suzanne Jones, Executive Director of Eco-Cycle

Some recycling entities were able to obtain loans during the first wave.

Denton Plastics, based in Gresham, Oregon, recycles both post-consumer and post-industrial plastic waste. The company recently learned that it had been approved to receive a PPP loan after acting quickly to apply and staying on top of some complicated application details.

“It was quite stressful just because the rules were changing,” said Denton president Nicole Janssen.

Janssen said a key part of the company’s success was having a strong relationship with its bank. Denton has used the same bank and worked with the same people for years, which made the process of resolving application issues easier.

Denton did not lay off any employees and the loan will help the business continue to operate at steady employment levels. Janssen said the financial assistance was important because the collector’s overall business is down 10% to 20% since the pandemic took hold.

In nearby Molalla, Oregon, Northwest Polymers processes plastic waste from manufacturers and other industrial sources.

Shortly after applying for the PPP, company owner Mark Shuholm received an email from his bank saying there was no more money to lend. Due to overwhelming demand, high volume of applications and limited time, the bank was unable to process all applications before funding reached its cap.

Shuholm described the PPP application process as a bit like a lottery.

“If you had the right relationship with the right bank that had their system in place to get the application processed and submitted, then you probably got funding,” he said.

Eco-Cycle hopes to be approved in this final round of funding. Jones said financial aid to cover eight weeks’ pay would be “extremely helpful”. As a non-profit organization, payroll accounts for a good portion of the company’s costs each month.

“Being able to cover the payroll for two months would be a huge advantage in uncertain times,” Jones said. The organization has suspended some of its operations, including a center dedicated to processing hard-to-recycle materials, due to difficulties in ensuring social distancing. In addition, its commercial collection activity has slowed down considerably.

Shuholm is also hoping for help, but for now he noted his business is still running and his employees are healthy.

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

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

“Whether a company made the cut often depended on how and where it did its banking,” the newspaper reported.

In another indication of the power wielded by banks in the PPP process, Wells Fargo is facing a lawsuit alleging the company unfairly prioritized companies seeking larger loans, instead of treating them according to the first come, first served principle. Bank of America, JPMorgan Chase and Bancorp were also sued.

Help where it counts

In Vermont, an electronics recycling company that was approved for a PPP loan says the money will be a serious help in continuing operations.

American Retroworks, which operates a recycling plant in Middlebury, Vermont, was among the first in its county to submit its request to its local bank, owner Robin Ingenthron said. The company was approved for a loan of $224,000, based on eight weeks of average payroll costs from last year.

Prior to the payroll program, Ingenthron was doing some pretty grim contingency planning. The possibilities were similar to what the company foresaw in 2014 when it lost a big contract and in 2008 during the financial crisis, he said.

“There was definitely a scenario where we went to Chapter 11 and used the money left over to outsource whatever was left and leave the factory clean,” he said. “We’ve had that and worse scenarios, and this gives us a better one.”

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

“If you had the right relationship with the right bank that had their system in place to get the application processed and submitted, then you probably got funding.”
–Mark Shuholm, owner of Northwest Polymers

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

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

“Obviously it’s something we didn’t want to do because there was no revenue to compensate for it,” he said.

With the funding, e-End is able to continue paying its 20 employees even when the facility is not running, as well as paying rent and utilities.

The story of the Maryland recycling company highlights another facet of the P3 process: in some cases, the experience went smoothly. 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,” Chafitz said, noting that his good relationship with his bank, as well as the thoroughness of the information submitted with the application, helped speed up approval.

The company received its PPP funds on April 13.

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

A version of this story appeared in Plastics Recycling Update on April 22.

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