ith the pandemic pummeling every industry in Alaska during the bulk of 2020, many companies were able to leverage federal economic assistance through the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Businesses in various industries took advantage of opportunities like the Payroll Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) to retain staff, pay critical expenses, and keep their doors open.

Without these borrower-friendly funding options, many Alaska businesses would have had an even tougher time surviving this pandemic.

CARES Act federal aid has been a critical lifeline for companies in Alaska and elsewhere. The PPP loan was implemented by the Small Business Administration (SBA) and US Treasury Department primarily to finance payroll for small businesses impacted by the novel coronavirus pandemic. The program—which reopened in January and is once again accepting applications—expanded the traditional SBA 7(a) loan program to offer businesses loan forgiveness for retaining their employees.

Under the original provisions, PPP loans carried an interest rate of 1 percent and matured in two years if issued prior to June 5, 2020 or five years if issued after June 5. No collateral or personal guarantees were required, and neither the government nor lenders could charge small businesses any fees. In addition, loan payments were deferred for borrowers who apply for forgiveness and meet other criteria.

The EIDL program offers alternative funding in the form of a loan up to $2 million and/or loan advance up to $10,000. EIDL assistance is designed to support small businesses, small agricultural cooperatives, and nonprofit organizations that are experiencing a temporary loss of revenue. The loan proceeds provide working capital to help borrowers cover normal operating expenses, including healthcare benefits, rent, utilities, and fixed debt payments.

EIDL funding has a higher interest rate than a PPP loan, but it has longer repayment terms and fewer spending limitations. Under EIDL, the interest rate will not exceed 4 percent, the maturity is up to thirty years, and there are no pre-payment penalty or fees. However, loan amounts of more than $25,000 require collateral, preferably real estate.

The EIDL program is administered directly by the SBA, so applicants don’t need to work with a local lender. Instead, they can apply online, and the SBA will send an inspector to estimate the cost of their damage. On June 15, 2020, SBA resumed accepting new EIDL applications from eligible small businesses and private nonprofits.

In terms of loan volume, PPP, EIDL, and EIDL Advance programs distributed around $2 billion directly to Alaska’s small businesses and nonprofits at a time when they desperately needed it, according to Jon Bittner, executive director of the Alaska Small Business Development Center (SBDC). “That was in addition to the additional UI [unemployment insurance] benefits, one-time individual stimulus payments, and a host of other federal support,” Bittner says. “These funds were crucial to preventing the economic impacts of COVID-19 from crippling our economy. It’s important to note that even with all of that support, we still saw unprecedented unemployment levels and a large number of business closures.”

According to Bittner, the latest PPP and EIDL loan figures for Alaska are:

Total PPP funding: $1,309,375,597
Number of PPP loans: 12,044
Number of saved jobs: 112,000

Total EIDL funding: $443,771,900
Number of EIDL loans: 7,461

Total EIDL Advance funding: $32,751,000
Number of EIDL Advances: 10,389

Within Alaska, Northrim Bank, First National Bank Alaska (FNBA), and Wells Fargo processed the bulk of the PPP loans in 2020. Northrim Bank was the leading lender for PPP loans in Alaska, providing about 23 percent of the loans, or just under 2,900 loans and $375 million in volume, according to Mike Huston, executive vice president and chief lending officer at Northrim.

The loan proceeds were used to cover payroll for employees who might have otherwise been laid off or furloughed during the pandemic. “PPP funding was a relief to many businesses who were hurting during a very difficult time,” Huston says.

FNBA processed $345.5 million in PPP funding and 2,450 total loans, according to Chad Steadman, senior vice president and corporate lending director at FNBA. The undertaking was particularly challenging due to multiple factors unfolding at the same time. Steadman explains: “We had the PPP loan applications originating, we also were accommodating customers with modifications of loans and interest payments, and we were working remotely and interrupting our regular business activities.”

Processing PPP loans has been a “journey” for Wells Fargo, according to Small Business Leader Damon Dishman. In Alaska, Wells Fargo was able to fund 1,164 total loans or $74 million worth of loans, representing 7,727 jobs saved. “Eighty-seven percent of those loans were for less than $100,000,” Dishman says. “Those are smaller businesses that tend to have more struggles with access to capital and reserves, and that makes us really proud.”

Facilitating EIDL and PPP funding was a monumental feat for the government, lenders, and program participants. Bittner of the SBDC put it this way: “I think that what SBA and other federal, state, and local government agencies were asked to do during this crisis was unbelievably difficult, complicated, and without precedent in modern times. I believe that all of the programs had their difficulties that led some to criticize how the funding was deployed, but overall what was accomplished these last six months or so is nothing short of amazing. The SBA, in particular, did an amazing job of deploying massive amounts of capital to businesses in every city in America in a short timeframe.”

While EIDL funding was fully administered and directly facilitated through the SBA, businesses were able to apply for PPP loans through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. The application process was challenging and confusing at times, with lenders scrambling to help businesses adapt to the SBA’s fluctuating requirements.

“Businesses were required to submit an application that outlined their payroll and qualifying rent and utility expenses,” Huston says. “Businesses used their 2019 expenses to estimate their 2020 expenses. Loan amounts were based off previous actual expenses. The loan was then submitted to the SBA and, if approved, distributed back through the financial institution submitting the loan application.”

Huston continues, “As the program evolved, more businesses were able to submit applications for loans and the rules for loan calculations shifted to include more types of businesses and payroll.”

At FNBA, it was an all-hands-on-deck situation. “When the first origination was coming, we had to pull so many resources from different areas of the bank,” Steadman explains. “We had people from IT and human resources helping process loans.”

Initially, the bank focused on taking care of its existing customers and then any other business in the state. “We processed PPP loans up to the last day [of the second round of funding, which closed in August],” Steadman says. “The majority of these were customers, but there were a lot of non-customers as well.”

Wells Fargo also opted to prioritize offering PPP funding to its existing customers. That was a tough decision to make, considering the needs in the community, Dishman says. But it made sense given the potential for fraud and the know-your-customer guidelines of the financial services industry. So Wells Fargo encouraged companies to explore all possible funding options in case the PPP money ran out—which it did at lightning speed.

Everyone at Wells Fargo was stretched to the maximum, says Dishman, who worked twelve-to-fourteen-hour days, seven days a week, for nine weeks straight. “There was a build-it-while-you-fly-it approach,” he says. “We had to redeploy thousands of team members and get an application process set up… We ended up funding 194,000 applications for over $10.5 billion in loans. That was sixty-one times the total number of SBA loans funded annually by Wells Fargo. It was a tsunami of loans.”

Wells Fargo’s average PPP loan amount was $54,000, with 41 percent of loan originations from low- to moderate-income or 50 percent minority census tracts.

At this phase of the PPP initiative, a chief concern of many borrowers is applying for loan forgiveness. PPP loan customers have ten months from the end of their covered period to file for forgiveness and the payments are deferred during this time. To make the process easier, the SBA, in consultation with the Treasury Department, offered a revised, borrower-friendly PPP loan forgiveness application, followed by EZ and Simplified versions that require fewer calculations and less documentation for eligible borrowers.

Lenders have also provided myriad resources to help PPP loan borrowers and support businesses in general during the pandemic. For example, Northrim has consistently worked to assist businesses and individuals impacted by COVID-19, including allowing deferred loan payments and additional loan funding.

The bank has also facilitated the use of government-sponsored programs such as the Main Street Program, the United States Department of Agriculture Business & Industry CARES Act Program, the SBA, Bureau of Indian Affairs, and AK SAFE Act funding through the Alaska Industrial Development and Export Authority.

In addition, Northrim offers a PPP Forgiveness Application web page with a video explaining how to complete the SBA’s simplified form required for loans from $50,000 to $150,000.

Wells Fargo also includes PPP-related assets on its website, including a small business resource center to bolster the business resiliency. The site offers webinars, infographics, and articles to help businesses navigate the pandemic. Wells Fargo also launched a PPP Loan Forgiveness Center with SBA-related information, tools, and other resources.

Wells Fargo launched its Open for Business Fund that focuses on helping small businesses stay open and save jobs by increasing access to capital, technical expertise, and long-term resiliency programs. The fund recently awarded Spruce Root, a Juneau-based Community Development Financial Institution, $250,000 to support its products and services for entrepreneurs.

The Open for Business Fund is part of Wells Fargo’s commitment to donate 100 percent of gross processing fees—$400 million—that it generated from the government to help businesses. The bank is planning to allocate the money over a three-year period and invest it in three tranches: access to capital; technical assistance; and recovery and resiliency. “Early on when the PPP program was announced, our CEO made the commitment that we would donate all fees,” Dishman says. “We did not want to profit from this program.”

The EIDL and PPP funding impacted businesses in a variety of industries throughout Alaska. For instance, SBA records show that many larger entities received PPP loans of $5 million to $10 million each and retained several thousand jobs. They include Arctic Slope Native Association (295 jobs), Cruz Construction (215 jobs), ICE Services (367 jobs), Matanuska Telephone Association (267 jobs), Nana Worley (231 jobs), Northern Energy Services (298 jobs), and South Peninsula Hospital (439 jobs).

PPP financing also had a major effect on smaller enterprises. Take for example Land’s End Resort in Homer. The year-round, beachfront retreat received a PPP loan of more than $350,000 through Northrim Bank in April, which it spent on payroll, according to co-owner Sara Faulkner. The hotel also obtained much-needed EIDL funding in May to help cover the cost of goods sold and operating expenses like advertising, interest, and utilities.

With breathtaking views of Kachemak Bay, Land’s End is a popular vacation destination, but COVID-19 significantly affected its operations. And without the EIDL and PPP funds, the resort likely would have had to close its restaurant and lay off thirty to forty employees. “These loans were integral to keeping business open this summer,” Faulkner says.

PPP funding was also crucial for Fejes Guide Service, which operates lodges in Kodiak and near Cordova. The company received a PPP loan in April through its long-time financial institution FNBA. “At first when the PPP came out, it was very confusing,” says owner Sam Fejes. “If it wasn’t for First National, I don’t know if I would have ever gotten it.”

The loan—less than $50,000—helped Fejes Guide Service rebound from being shut down in the spring due to COVID-19 to save its fall season. Having the financing positioned Fejes to be able to make better decisions and structure his whole year. It allowed his business to prepare for incoming clients as well as implement extra safety precautions once they arrived. This included cleaning the lodge twice a day, testing employees and clients for COVID-19, replacing cloth hand towels with disposable paper towels, and giving each client a face mask with the company’s logo.

It was a challenging time, Fejes says, but the PPP loan helped significantly. “My business was full for the fall,” he says. “I was turning people away.”

Overall, PPP loan borrowers and financial institutions hold positive views about the impact of the CARES Act federal aid on Alaska. The financing was sufficient for some recipients but less so for others. However, the funding has brought a great deal of comfort to businesses as they struggle to ride out the pandemic. “I think what we have been able to do has been a tremendous help,” says Steadman of FNBA. “Hopefully, there will be light at the end of the tunnel soon.”

Huston of Northrim also expresses overall optimism about PPP loan implementation in Alaska. The PPP funding helped businesses stay open during the pandemic and allowed them to still pay their employees, even when revenue was low due to closures and slowdowns, he says. But more funding would help. “The first round of funding was used up very quickly and some businesses were not able to receive a loan until Congress approved more funding for the program,” he says. “After the second round of funding was made available, businesses were able to receive the funding that they needed. The expansion of the program to include seasonal businesses, sole proprietors, and others helped many throughout Alaska. Additional funding for seasonal business that lost their entire 2020 season as well as those impacted by newly instituted mandates would be beneficial.”

The development and upcoming deployment of new COVID-19 vaccines offers some light at the end of the tunnel. However, Bittner says, the next three to six months are going to be some of the hardest, with COVID-19 cases rising, federal relief funding being exhausted, unemployment remaining high, and state and local governments facing significant budget shortfalls. “There’s no silver-bullet solution to the situation we’re in,” he says. “It’s going to take a variety of efforts at all levels to get through this and come out the other side—but I’m confident that Alaskans will come together and do what it takes. It’s what we always do when things get hard.”