PPP Loans and Factoring: How Allied Continues Serving Our Clients During the Pandemic

In 2020, more than 521 billion dollars were paid out in Paycheck Protection Plan loans, known as PPP loans, according to data from the U.S. Small Business Administration. The program, designed to provide assistance to millions of businesses struggling in the wake of the COVID-19 pandemic is now in its second round of draws.

During this second round, which opened January 13, some businesses who received an initial PPP loan may qualify for a second loan—although qualifications are a bit more stringent than with the first round.

The pandemic, and subsequent government assistance to businesses via the Paycheck Protection Program has had an interesting effect on the factoring industry. During the First Draw, there was so much uncertainty about our economic future with shutdowns that everybody who could apply for a PPP First Draw Loan did. In the factoring industry, the result was a severe slowdown as companies experienced dramatic reductions in profits, or shut downs altogether, explains Dan Karas, Executive Vice President. When a business isn’t generating invoices, there are no invoices for a factor like Allied Affiliated Funding to purchase.

“In the third quarter of 2020, we saw things pick up as the market began to recover and business started to reopen,” says Karas. “Some companies, particularly those in the manufacturing and sales of personal protective equipment (PPE), transportation and logistics experienced a banner year in 2020.”

Does my business qualify for a Second Draw PPP Loan?

If you received a First Draw PPP Loan, you may be eligible to receive a Second Draw. According to the SBA, a borrower is generally eligible for a Second Draw PPP Loan if the borrower:

  • Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses.
  • Has no more than 300 employees; and
  • Can demonstrate at least a 25 percent reduction in gross receipts between comparable quarters in 2019 and 2020.

How to apply for a Second Draw PPP Loan

Borrowers may apply for a Second Draw Loan until March 31, 2021. According to the SBA, Second Draw PPP Loans can be used to help fund payroll costs, mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020 and certain supplier costs and expenses for operations.

If your business did not receive funding under the First Round, you may be eligible for a First Round Draw, as there are still funds available.

Allied Affiliated Funding, a division of Axiom Bank, N.A.. is a PPP lender providing assistance to businesses during this time of uncertainty. To apply for a PPP Loan with Allied, click here.

What other help is available?

In the initial wake of the pandemic, many banks were more accommodating to their clients and borrowers who were suffering, but that leniency won’t always exist. As banks approach their regulatory review cycles, they will begin to identify borrowers who aren’t performing and may need to make changes in their portfolios, Karas explains.

If you find yourself on the receiving end of an exit conversation with your banking partner, it’s not the end of the road for you. Allied exists to support businesses struggling to maintain working capital and want to work with you to help you get back on your feet.

Whether you are a traditional lender facing upcoming difficult conversations with your clients, or you are a borrower who is feeling the pressure from your lender, now is the time to start talking about making the move to Allied.

While we believe the future looks promising, we understand that there is still uncertainty ahead. At Allied, we’re in the relationship business, and we’re here to support you and your company, whether that’s in helping you secure a First or Second Draw PPP Loan, or by giving you a boost in working capital via accounts receivables financing. Contact us today to learn more about how we can help.