Out-of-town businesses receive millions in PPP relief funds from local bank – CU-CitizenAccess.org
In April 2020, the federal Small Business Administration (SBA) began issuing loans through the Paycheck Protection Program (PPP). By the end of the program, more than 4,000 Champaign-Urbana businesses received repayable loans, according to SBA data.
Among those thousands is a company called 42 Lines. Although it received funds in Champaign, the company is not headquartered in Illinois and does not have an office in Champaign. In fact, 42 Lines is a software company based in Boulder, Colorado, and it received just over $2.5 million from a bank in Champaign.
The company’s second known location is in Toronto, more than 1,000 miles from central Illinois.
42 Lines founder Clint Popetz said he wanted to work with Busey Bank as he had in the past when he lived and worked in the area.
“I wanted to work with Busey because it’s a small bank, and since the bank is getting a discount, I wanted it to go to a bank in that community rather than a bank like Chase,” said said Popetz. “Also, when I was chairman of the board of Common Ground Food Coop (many years ago), Busey had been very kind in giving us a loan to help us move to Lincoln Square, and I am therefore faithful.”
Banks receive around 3-5% fees on loans, which would amount to up to $125,000 in fees for Busey for his loan to 42 Lines.
SBA rules on payday loans did not appear to set geographic limits on loans. There was no apparent requirement that businesses receiving money from the program must be in the lender’s community. An SBA fact sheet said “every facet of PPP was designed to keep Americans employed,” and the first loan application said it’s “designed to directly incentivize small businesses to keep their employees on the payroll”.
However, data analyzed by the Conference of State Banking Supervisors (CSBS) after the first round of lending showed that community banks had a larger share of small business lending than large banks.
“Known for their relationship lending and personal relationships with customers, community banks have always prided themselves on supporting small businesses in their local communities,” the December 2020 analysis reads.
Kim DeVore, a member of the CSBS Bankers Advisory Council and president of Jonah Bank of Wyoming, said her staff worked long nights and weekends to ensure their customers could get into lines quickly and efficiently. waiting for PPP funding.
“Our goal has always been to build a better Wyoming by serving small businesses and giving back to our communities. I am very proud of our team’s dedication to making a difference in this crisis by providing PPP loans to eligible small businesses. This is truly one of Jonah Bank’s brightest moments,” Devore said in the CSBS article.
But Champaign Small Business Development Center director Don Elmore pointed out that some situations like 42 Lines are possible because it’s a federal program.
“Unlike some others, like Illinois-based programs, the Paycheck Protection Program was a federal program. I don’t know if that’s necessarily a big deal,” Elmore said.
So companies like 42 Lines can receive millions from banks in Champaign and Urbana, like Busey Bank, without permanently residing there.
However, to register for a loan, a business needs a local address.
The software company is offering a location in Champaign as part of PPP loan registration. The location is the mailing address of an accounting firm called Martin Hood. Although it does not have an office there, 42 Lines is still listed because the company uses them for tax purposes.
Martin Hood received $787,500 in 2020. He was also endorsed by Busey Bank, which lent $65,404,831 in total, the most loans in Champaign County.
The top recipients of PPP loans fluctuated between the two towers, with commercial flooring and college leaders being the top recipients of both.
In total, just over 4,000 businesses received loans in Champaign-Urbana. The top 3 companies to receive loans were Birkey’s Farm Store with $5.73 million, Wolfram Research with $5.57 million and College Chefs, Inc with $4.73 million.
42 Lines received two loans, one in each round. The company was listed under a slightly different name in the second round according to the data, but enough to be the fourteenth largest recipient of local funds when combined at $2,533,687.
Popetz founded 42 Lines in Urbana about 13 years ago and recently moved the official address to Colorado where his brother and co-owner Marcus Popetz lives.
“Like many companies, ours has been hit hard by the pandemic as all purchase budgets for our product (software for higher education classrooms) have been frozen and sales conferences have been cancelled” , Popetz said in an email. “We survived by the skin of our teeth with PPP loans.”
Some sales conferences, often nationwide, were one-time events that were canceled, but Popetz said some recurring conferences still haven’t reverted to in-person events. InstructureCon, for example, was held online last October.
“However, the biggest blow for us was the freezing of university budgets,” he said. “In particular, many of our customers are at community colleges, and many of them have frozen all purchasing decisions until they can see how the pandemic will affect their enrollment. This, fortunately, began to subside from last fall.
Popetz said the company has been able to avoid layoffs since the pandemic began.
“This has been especially crucial because our employees and their families also receive their health insurance through us,” he said. “Many of them have been with us since the company was founded in 2009. It really is a family.”
Overall, most SBA loans were for the area used to cover payroll expenses and rent. The effectiveness of money depends on what changed after you received it. For some businesses, staying open was a sign of success. For others, having the ability to do what feels best is a win, Elmore said.
“[The program] was crucial for many of them. Even though they were the ones who had to shut down and lay off employees, it gave them options,” Elmore said.
Some small businesses in Champaign have closed but may continue operations in other locations, such as Destihl and its Bloomington location.
Overall, the Independent Community Bankers of America (ICBA) found that states with strong relationships between community banks and small businesses were more successful in addressing payroll-related employment issues.
“According to the data, states in which community banks had a higher overall share of small business loans covered at least half of first-quarter small business payrolls more quickly through PPP loans,” said a report. from the November 2021 ICBA.