Federal loans a ‘godsend’ for companies that secure them

Electronics recycling firms and other processors across the country are looking to a federal assistance program to help them overcome cash-flow problems sparked by the coronavirus. Some have been successful, but others are running into banking complexities and tapped-out funding.

The Paycheck Protection Program (PPP) was launched this month by the federal Small Business Administration, as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act that was approved by Congress in March.

The program, which was initially stocked with $349 billion, offers businesses a loan designed to keep their workers on the payroll. However, the funds were depleted within days and Congress is now working on legislation to refill the coffers.

Some e-scrap companies were approved in the first round of funding – and they’re thankful for the relief the federal assistance will provide.

“Having this program was a godsend,” said Robin Ingenthron, owner of American Retroworks, which operates a recycling plant in Middlebury, Vt.

Billy Johnson, chief lobbyist for the Institute of Scrap Recycling Industries (ISRI), said many of the organization’s members applied for loans and received them quickly, “depending a lot of course on their banks and lending institutions.”

ISRI advised its members to “immediately contact their lending institutions and prepare the forms to get these loans,” once the CARES Act was passed, Johnson added.

E-Scrap News spoke with a variety of recycling companies that have applied for PPP loans over the past several weeks. They reported mixed results, many agreeing that success has largely come down to timing and the connections applicants had at financial institutions.

Loan provides a ‘better scenario’

Under the terms of the PPP loan, businesses that keep their workers on the payroll for eight weeks after receiving the loan and use the money in accordance with SBA guidance on payroll, rent, mortgage interest or utilities will have the entire loan forgiven at the end of the eight-week period. Businesses work with their own bank to apply for the assistance.

The program began taking 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 around the country and by April 16 the program closed to new applications.

But Senate lawmakers on April 21 passed the “Paycheck Protection Program and Health Care Enhancement Act,” providing additional funding for PPP and other coronavirus relief efforts. Treasury Secretary Steven Mnuchin said the legislation gives another $310 billion for the PPP. The plan was slated for a vote in the House of Representatives on April 23.

However, some recycling entities were able to secure loans in the first wave.

Electronics recycling firm e-End of Frederick, Md. was approved for a six-figure loan through the program, a substantial boost for the company. In March, e-End closed its processing facility to keep employees and clients safe. The company plans to reopen once safety threats from the pandemic pass.

“The way the program was designed worked perfectly for us.”
–Steve Chafitz, president of electronics recycling company e-End

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

“Obviously it’s something we didn’t want to do because there was no income to offset that,” he said.

With the funding, e-End is able to keep paying its 20 employees even as the facility is not operating, as well as pay rent and utilities.

The Maryland recycling firm’s story highlights another facet of the PPP process: In some cases, it was a completely smooth experience. 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 information submitted with the application, helped speed up the approval.

The company received its PPP funds on April 13.

Ingenthron of American Retroworks was among the first in its county to get his application into his local bank, he said. The business was approved for a $224,000 loan, based on eight weeks of average payroll costs from last year.

Before the payroll program, Ingenthron was doing some pretty bleak contingency planning. The possibilities were similar to what the company planned for in 2014 when it lost a large contract and in 2008 during the financial crisis, he said.

“There was definitely one scenario where we would go Chapter 11 and use the remaining  money we had to outsource whatever was left and leave the plant clean,” he said. “We had that and worse scenarios, and this provides us a better one.”

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

Luck of the draw

Banking and timing played such key roles in the outcome that one plastics recycling operation 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 funded,” said Mark Shuholm, owner of Molalla, Ore.-based Northwest Polymers, which processes scrap plastics from manufacturers and other industrial sources.

Not long after applying, Shuholm received an email from his bank saying there was no more money to lend. Due to overwhelming demand, high application volume and limited time, the bank was unable to process all applications before the funding hit its cap.

“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 funded.”
–Mark Shuholm, owner of plastics processor Northwest Polymers

On the municipal recycling side, nonprofit processor Eco-Cycle of Boulder County, Colo. also encountered the intricacies of the application process, and did not end up with any money.

The organization, which operates the municipal materials recovery facility (MRF) in Boulder, banks with a credit union, and that financial institution had to get approval to participate in the PPP program before accepting applications.

With the quickly changing rules coming down from the federal government, the process of getting ready to accept applications took longer than usual.

Once the credit union was approved and the Eco-Cycle application was completed, the organization submitted it but was informed that the PPP money was gone, said Suzanne Jones, executive director of the nonprofit organization. She indicated the group would continue to look into loan possibilities.

“We are poised, but we have yet to be successful,” she said.

Jones said it’s her understanding that with more money likely to be authorized for the program, businesses that didn’t make it in the first round can be reconsidered for funding.

Shuholm of Northwest Polymers is also aiming to be considered in the next round of loan applications. He noted that his company is still operating and that his employees are healthy.

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

At the same time, however, the experiences of small businesses during this episode are bringing harsh light to some in the banking sector. A recent Wall Street Journal article reported that application approval wasn’t necessarily based on a company’s chances of surviving the pandemic.

“Whether a firm made the cut often came down to how and where it banked,” the newspaper reported.

In another indication of the power banks wield in the PPP process, Wells Fargo faces a lawsuit alleging the company unfairly prioritized businesses seeking larger loans, instead of processing them on a first-come, first-served basis. Bank of America, JPMorgan Chase and Bancorp have also been sued.

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

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

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