It feels like years ago that we were hoping to get past the COVID-19 pandemic by Easter. Back at that time, even those with the most pessimistic view assumed that we’d be back to some sense of normalcy by the end of 2020. Yet here we are, midway through the second month of 2021, and while vaccines are being rolled out, it will still be a few months, at least, before life gets closer to normal.
Even when the U.S. has vaccinated enough of the population to achieve herd immunity, normal life will still not immediately return. The rest of the world is on its way to recovery, but some countries will take longer than others. In our globalized age, we cannot fully consider the current crisis over until we can live the kind of international lives that many of us had previously lived before the pandemic began.
For Chicago small businesses, this is not good news. Many businesses have been struggling since March of last year. The lockdowns and stay-at-home orders have made it impossible for businesses to function as usual. Some were able to adapt, while others simply could not survive without in-person patronage (or tourists). The subsequent economic crash had an impact even on the businesses who have been staying afloat. Hundreds of thousands of businesses have permanently shuttered.
While relief initially came in the form of the Payment Protection Program (PPP), which provided stimulus checks to small and medium-sized businesses, the hundreds of billions of dollars loaned out have long been depleted. A year later, we are now onto the third round of PPP loans.
Are PPP loans still keeping Chicago’s businesses alive? Chicago small business financing is of course a very important factor in keeping the local economy afloat.
Here is what we know about the rollout of the third round of PPP loans in Chicago so far.
PPP Round Three
It’s no secret that round one of PPP rollout in Illinois was problematic to say the least. While there were indications of mismanagement right from the start, it only came out much later that a third of PPP funds had gone to big businesses that got loans of $1 million or more.
The damage caused by this can’t really be measured, but judging by the number of small businesses that shut down permanently in Chicago alone, the availability of additional funding was badly needed.
That said, almost 27 thousand Illinois businesses received PPP loans which have certainly been responsible for keeping many of them afloat.
The second round of PPP was mostly approved for the dispensation of loans to businesses that had not received the maximum amount in the first round. Considering that those first loans were intended to last only a few months, many companies did not receive as much as they would have knowing the crisis would extend this long. These second PPP loans were helpful in tiding businesses over for a bit longer.
However, the PPP needed to provide further Chicago small business loans as we enter what we hope will be the final stretch of the pandemic. Round three is rolling out now. It remains to be seen just how many Illinois businesses will benefit, and whether bigger businesses will again take a big chunk of the funds.
Like the previous two rounds of PPP loans, the new loans are being dispensed by a number of institutions. Big and small banks are among those responsible, but a large portion of the funds have been handed to online lenders in Chicago.
Who are the Online Lenders?
Online lenders are an alternative to the banks, which have traditionally given out business loans in the past. Getting online business loans in Chicago and Illinois is quick and easy. Technically, online lending is the solution that makes sense in the twenty-first century. There are, however, downsides, but these have more to do with the lenders themselves and government regulation.
It has become increasingly easy to get unsecured loans at high interest rates from online lenders. Many of these lenders use predatory practices to provide loans that are far more likely to drag a business into debt than to help it survive and thrive. A lack of regulation has made this environment possible.
Nonetheless, good lenders provide an important service with regards to Chicago small business financing. This is one of the reasons they are being trusted by the Small Business Administration (SBA) with PPP loans. They can dispense these loans efficiently, getting the funds to businesses who are in desperate need.
This is particularly important considering that in-person processing is unwise or just not possible. Rather than using the unsophisticated online alternative that a bank has to offer, business owners can use a system built precisely for this purpose.
Trusting Chicago’s online lenders with PPP loans is also necessary for the survival and success of these lenders. The pandemic has been hard on all kinds of businesses, and online lenders are no exception. Many businesses have not been able to afford private loans, and some have just been too risky an investment to be truly viable clients. In dispensing PPP loans, they will be providing funds to local businesses and building trust.
Where Do We Go From Here?
We are now on the third round of PPP and hopefully this will be the last that is necessary. However, this is far from certain. The pandemic has not followed a straight line thus far, and there might still be some more unexpected twists to come.
Furthermore, the end of the virus will not necessarily signal the end of our economic troubles. The reality is that thousands of businesses need to fully reopen and millions of people need to find new jobs. We could be dealing with the economic fallout for a while longer beyond the point when herd immunity gets reached.
That said, for businesses that have survived and are now benefiting from PPP loans in 2021, there is sufficient reason for optimism. The light at the end of the tunnel is, after all, getting much closer.
Paul M. Banks runs The Sports Bank, partnered with News Now. Banks, the author of “No, I Can’t Get You Free Tickets: Lessons Learned From a Life in the Sports Media Industry,” has regularly appeared in WGN, Sports Illustrated, Chicago Tribune and SB Nation. Follow him on Twitter and Instagram.
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