Out of town business receives millions in PPP relief money from local bank

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Source: U.S. Farm Credit Administration

In April 2020, the federal Small Business Administration (SBA) began to give out loans via the Paycheck Protection Program (PPP). By the end of the program, over 4,000 businesses in Champaign-Urbana received forgivable loans, according to SBA data.

Among those thousands is a company called 42 Lines. Despite receiving funds in Champaign, the business isn’t headquartered in Illinois and does not have an office in Champaign. In fact, 42 Lines is a software business based in Boulder, Colorado, and it received just over $2.5 million from a bank in Champaign. 

The business’s second-known location is in Toronto, over 1,000 miles from central Illinois.

Founder of 42 Lines, Clint Popetz, said he wanted to work with Busey Bank as he had in the past when he lived and worked in the area. 

“I wanted to work with Busey because they are a smaller bank, and since the bank gets a cut, I wanted it to go to a bank located in that community rather than a bank like Chase,” Popetz said. “In addition, when I was the board chair of Common Ground Food Coop (many years ago), Busey had been very good about making us a loan to help our move to Lincoln Square, and so I have some loyalty to them.” 

Banks receive about 3-5% in fees on loans, which would be up to $125,000 in fees for Busey for its loan to 42 Lines.

SBA rules on the paycheck loans did not appear to set geographical limits on loans. There was no apparent requirement that businesses that receive money from the program are to be in the community of the lender. An SBA fact sheet said “every facet of PPP was designed to keep Americans employed,” and the application for the first loan said it is “designed to provide a direct incentive for small businesses to keep their workers on payroll.”

However, data analyzed by the Conference of State Bank Supervisors (CSBS) after the first round of loans showed that community banks had a greater share in lending to small businesses than larger banks.

“Known for their relationship lending and their personal connections to customers, community banks have always prided themselves in supporting small businesses in their local communities,” the December 2020 analysis said.

CSBS Bankers Advisory Board Member Kim DeVore, who is president of Jonah Bank of Wyoming, said her staff worked long nights and over weekends to ensure their clients were able to make it into the PPP funding queues quickly and efficiently. 

“Our focus has always been on building a better Wyoming by serving small businesses and giving back to our communities. I’m very proud of our team’s dedication to make a difference in this crisis by delivering PPP loans to eligible small businesses. It is truly one of Jonah Bank’s shining moments,” Devore said in the CSBS article.

But the director of the Small Business Development Center in Champaign, Don Elmore, stressed that certain situations like 42 Lines are possible because this is a federal program.

“Unlike some of the other ones, like the Illinois-based programs, the Paycheck Protection Program was a federal program. I don’t know if that necessarily is a big deal,” Elmore said.

Thus, businesses like 42 Lines can receive millions from banks in Champaign and Urbana, such as Busey Bank, without permanently residing there. 

However, to register for a loan, a business does need a local address.

The software company does offer a location in Champaign under the PPP loan registration. The location is the mailing address to an accounting firm called Martin Hood. Even though it doesn’t have an office in the location, 42 Lines is still listed because the company uses them for tax purposes. 

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Martin Hood received $787,500 in 2020. It was also approved by Busey Bank, which lent $65,404,831 in total, the most loans in Champaign County. 

The top recipients of PPP loans fluctuated between the two rounds, with Commercial Floor Covering and College Chefs being a top recipient of both.

Overall, just over 4,000 businesses received loans in Champaign-Urbana. The top 3 businesses to receive loans were Birkey’s Farm Store with $5.73 million, Wolfram Research with $5.57 million and College Chefs, Inc at $4.73 million. 

42 Lines received two loans, one in each round. The company was entered under a slightly different name in the second round according to the data, but total enough to be the fourteenth-highest recipient of local funds when combined at $2,533,687. 

Popetz founded 42 Lines in Urbana about 13 years ago and recently moved the official address to Colorado where his brother and co-owner Marcus Popetz lives. 

“Like many businesses, ours took an enormous hit with the pandemic because all budgets for buying our product (software for higher education classrooms) were frozen and sales conferences were canceled,” Popetz said in an email. “We survived by the skin of our teeth with the PPP loans.” 

Some sales conferences, often all over the country, were one-time events that were canceled, but Popetz said some recurring conferences have still not returned to in-person events. InstructureCon, for example, was held online last October. 

“The biggest hit to us however was the freezing of budgets at universities,” he said. “In particular, many of our customers are at community colleges, and many of those froze all purchasing decisions until they could see how the pandemic was going to affect their enrollment. That, thankfully, started to ease up as of last fall.”

Popetz said the company was able to avoid layoffs since the pandemic began. 

“This has been especially crucial because our employees and families also receive their health insurance through us,” he said. “Many of them have been with us since the company was founded in 2009. It’s very much a family.”

Overall, most of the SBA loans were in the area used to cover payroll expenses and rent. How effective the money was depends on what changed after receiving it. For some businesses, staying open was a sign of success. To others, having the option to do what feels best is a win, Elmore said. 

“[The program] was crucial for a lot of them. Even if they’re the ones that had to close and lay off employees, it gave them options,” Elmore said. 

Some small businesses in Champaign closed but could continue business at other locations, like Destihl and its Bloomington location. 

Overall, the Independent Community Bankers of America (ICBA) found that states with strong relationships between community banks and small businesses saw more success in addressing employment issues relating to payroll.

“According to the data, states in which community banks occupied a higher overall share of small-business lending more quickly covered at least half of their first-quarter small-business payrolls via PPP loans,” a November 2021 ICBA report said.

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