(Watch this story Monday on WZZM 13) Two months after the application deadline for the third and final cycle of the Paycheck Protection Program (PPP) expired, he continued to be the driving force behind the US economy despite other borrowing opportunities.
“Businesses are a little slow to borrow now because they still have a lot of cash deposits from PPP payments,” said Bradley Henion, director of loans at ChoiceOne Bank. “Some of the borrowers didn’t use their money because they were waiting for (the loan) to be forgiven and they didn’t deploy that money in the system. This slowed the demand for loans until the end of 2020 and this year, as businesses kept a lot of cash and didn’t need to borrow for a lot of expenses. “
According to the US Small Business Administration, as of May 31, 11,823,594 loans had been approved for a total value of $ 799,832,866,520 from 5,467 lenders nationwide. Two of these local lenders were ChoiceOne Bank and Mercantile Bank of Michigan.
Henion and Mercantile Bank of Michigan chief executive officer Robert Kaminski said the majority of their borrowers have applied for PPP loans that are aimed at helping businesses financially navigate their way through the pandemic.
In 2019, Henion said there was an 8% growth in lending activity at ChoiceOne Bank. However, that changed in 2020.
“Apart from PPP lending, (lending activity) in 2020 has been very slow,” he said. “There wasn’t a lot of activity, but we took out $ 162 million in PPP loans in 2020, which added a lot to the bottom line. It showed strong growth in commercial lending, but much of it stemmed from the PPP lending process. “
“Normal banking activity was going on (in 2020), but PPP certainly dominated last spring and early summer 2020 and into the early months of this year,” Kaminski said.
Henion said the majority of the businesses that applied for the loans were small businesses that borrowed $ 150,000 or less because they had to keep their employees as their businesses began to experience COVID-19-related downturns. Some businesses have applied for loans to modify their operations and adapt to the demands of COVID-19, such as installing plexiglass, purchasing cleaning materials and construction.
According to the Mercantile Bank of Michigan website, the bank has helped 3,000 businesses that employ more than 56,000 people in Michigan with more than $ 700 million in funds through P3 loans.
The manufacturing industry has been one of the fastest industries to recover from the end of the pandemic. Kaminski said companies in this industry mainly use their PPP loans to purchase equipment, new materials for construction and expansion of their facilities, or to increase their lines of credit.
As the manufacturing industry rebounds, Henion said in the midst of the pandemic, companies in the travel and hospitality sectors were the first to suffer and they were frequent borrowers. Now, these industries are slow to recover.
In a normal year, Kaminski said people would apply for different loans throughout the year, such as home loans in the spring, summer and fall, car loans throughout the year, and consumer spending would increase during the holiday season in November and December, but this has not been the case. not happen last year.
Although requests for different types of loans have declined, Kaminski said purchases have actually increased.
“Most people have some sort of credit or debit card in their wallet, and during the early parts of the pandemic last year and much of 2021, people’s purchases on these cards were down by compared to 2019, ”he said. “They were just downstairs. But slowly, we started to recover as we got into the final months of 2020 and now that it’s 2021, we’ve basically returned to the normal trendline that we would see if the pandemic hadn’t happened. In other words, the people are there. They do their shopping. They buy (tickets) to go on vacation. They buy things for their house. They buy clothes. All intentional purchases picked up where card activity is where we expected, but for a long time there those card purchases were low indicating that people were sitting on their money. There was nothing to buy really because everything was closed, and people were crouching down and not doing much. Now people are starting to do things again. They go on vacation, they buy more gasoline (and) gasoline is also more expensive. All of these types of things show that people are spending their money again when they weren’t, especially around the same time last year.
Henion said he believes the increase in demand for loans will depend on interest rates and inflation.
“If the federal government is successful in keeping inflation rates and interest rates low, I think this fall and next year we will see an expansion. But if inflation rises and the Fed has to raise interest rates, I can predict caution on that, as the business community grows and borrows funds. “