Federal loans preserve thousands of Berkshire jobs, but many miss out

Sarah Eustis, CEO of Main Street Hospitality Group, said she will use Small Business Administration loan proceeds to protect the jobs of the 25 employees still on staff to care for the company's hotels and restaurants, which include Hotel on North in Pittsfield, the Red Lion Inn in Stockbridge and The Porches Inn of North Adams.

Tens of millions of dollars in federal loans will, for now, safeguard thousands of Berkshire jobs from the coronavirus pandemic's economic bite, area bankers say.

But, when the curtain on a Small Business Administration program came down abruptly Thursday, it appears that hundreds of local businesses still were waiting for money — or shut out entirely unless Congress backs new funding.

More than $7 billion in loans was approved in less than two weeks by the SBA for Massachusetts companies through the Paycheck Protection Program, part of the $2.2 trillion CARES Act.

Bankers in Berkshire County describe a chaotic process that called for them to work at breakneck speed with applicants, often without ever meeting them face-to-face due to coronavirus precautions.

Area lenders say they closed on loans that range from $1,000 to several million dollars, keeping their teams at work nights and weekends and adjusting to a stream of changes ordered by the SBA. If a borrower can document that 75 percent of the money is used to keep people employed, those loans are partially forgiven.

But, some bankers caution that what one termed "a rush to the trough for free money" could create trouble if borrowers fail to meet forgiveness terms and must pay the loans back over 18 months, as required. Those terms are not fully formed, some local bankers said.

"Nobody's thinking about how it gets paid or forgiven," said J. Jay Anderson, president and CEO of Pittsfield Cooperative Bank. "That's a lot to repay in 18 months."

Anderson's bank had 135 loans in the works when the SBA halted the program and has closed on one-third of them. They range from $10,000 to $1 million.

Around the region, figures on the numbers of jobs saved — it's a required field in the SBA application process — are notable.

Government-backed loans issued by Adams Community Bank will keep 1,750 people working. At Greylock Federal Credit Union, the tally was 2,977 jobs preserved as of Friday.

The program is a stimulus, of sorts, for the banks as well. Anderson said lenders receive a 5 percent fee on loans of less than $350,000; the percentage falls for larger loans.

"The fees are not worth what we've been going through," he said.

Borrower's account

One borrower, Main Street Hospitality Group, will use SBA loan proceeds to protect the jobs of the 25 employees still on staff to care for the company's hotels and restaurants, which include Hotel on North in Pittsfield, the Red Lion Inn in Stockbridge and The Porches Inn of North Adams.

Sarah Eustis, the company's CEO, said her team moved quickly to get applications in for the SBA program, "sifting through the tsunami of information about it that was changing all the time."

The company eventually bundled several loans through Lee Bank and the process went "surprisingly well," she said, due to what she called extraordinary help from the lender. Eustis declined to say how much the company borrowed.

With properties closed because of the coronavirus crisis, Main Street Hospitality Group has cut its staffing sharply, from a high that, in season, typically would top 275.

"We've retrenched, there's no question about it," Eustis said. "We still have payroll to pay."

Given the tight time frame, small companies in the Berkshires might have struggled to provide needed documentation, according to Jonathan Butler, president and CEO of 1Berkshire.

"It was a confusing program to navigate. The implementation and execution of it has been imperfect," Butler said.

"There are a lot of businesses that have missed this first wave of resources," he said, particularly small ones. Unless they also get help, Butler said, the region risks losing the diversity of its businesses.

"That group of small businesses has really not done great in this first round," he said. "We have to make sure we're keeping them on their feet as well. This problem is not going away."

Among those shut out are nonprofits that did not incorporate under the 501(c)(3) IRS classification, as well as for-profit businesses that did not have existing relationships with local bankers.

`Real heroes'

Bankers interviewed spoke of stress imposed by changing rules for banks and applicants and the sheer volume of demand. But, they credit the SBA and the CARES Act with providing a lifeline and say the on-the-fly changes strengthened the program.

Anderson, the Pittsfield Cooperative president and CEO, said he received details about how the program would work at 7:45 p.m. April 2, the night before loan applications were to be accepted.

"There have been changes daily since then," he said. "I tell people it's like building a car that you're driving."

Bankers now want the loan program extended.

Charles O'Brien, president and CEO of Adams Community Bank, said he called the office of House Speaker Nancy Pelosi asking for a new round of funding.

"There's real heroes in the banking world who made this happen," O'Brien said. "Everybody that's been involved has been working their rear ends off to make this happen."

Adams Community Bank's SBA loans ranged from $4,000 to over $1 million. O'Brien declined to say how much in all the bank loaned. At least two dozen prospective borrowers were not able to get an application accepted in this round.

"We are trying to save as many of these companies as possible," he said of the bank's customers. The SBA loans create what he views as a two-month safety net, though much remains unknown about what comes next for the Berkshire economy.

"It creates a lifeline," O'Brien said. "There is still additional uncertainty. We're still navigating through it."

Donna Halton, the bank's senior vice president for commercial lending, said customers are able to use loan proceeds to bring employees back to work.

"They've been struggling with the impact of this pandemic, not wanting to lay them off," she said.

John Bissell, president and CEO of Greylock Federal Credit Union, said that despite "hiccups" in the rollout of the loan program, it has enabled the institution to provide essential help to members facing an unprecedented time of uncertainty.

"It came on with a speed that we've never seen before," Bissell said of what some are beginning to call the Pandemic Depression. "We think there's a lot of demand out there."

On Thursday, a Greylock banker was inputting data for an application when the SBA abruptly halted the online loan-processing program, leaving an applicant out in the cold.

Greylock handled over $24 million worth of the SBA loans in the 13 days the program ran. They ranged from $1,000 to $2.3 million. Two-thirds of the loans went to companies with fewer than 10 employees.

"We could easily do the same amount with the need in the county," said Jodi Rathbun-Briggs, senior vice president and chief lending officer.

Like others, Rathbun-Briggs is concerned about small business. She and Bissell said it likely has been harder for them to get in the "queue" for SBA money.

"These much smaller businesses are going to have challenges accessing any kind of funding," Rathbun-Briggs said.

For the Main Street Hospitality Group, watchwords now are resilience, collaboration and preparedness, Eustis said.

The company still plans to open new properties in Rhode Island this year, but later than expected.

Given all the uncertainty, she said businesses need to be open and to share ideas and strategies. Her firm is creating scenarios about how things might play out and how it will respond, but she sees a limit to scripting for the unknown.

"Then it's pencils down," she said. "Focus on controlling what you can control."

Larry Parnass can be reached at lparnass@berkshireeagle.com, at @larryparnass on Twitter and 413-588-8341.