Lenders set to flood SBA with new PPP applications

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The paycheck protection program ran out of money less than two weeks after its launch. It might dry even faster the second time around.

Lawmakers appear to be on the verge of approving an additional $ 310 billion for the stimulus package, which provides loans to small businesses so they can pay employees and other basic operating expenses.

By some estimates, the new paycheck protection funds could disappear as quickly as 48 hours after they become available. And a flood of applications could further strain a portal that struggles to handle the initial workload.

“We are concerned, given the demand that we have observed, that [the proposed authorization] will not be enough, ”said Christopher Maher, president and CEO of OceanFirst Financial, a $ 10.2 billion asset in Toms River, New Jersey.

The Senate passed a $ 484 billion stimulus package on Monday by unanimous consent. Besides paycheck protection money, it includes $ 75 billion for hospitals, $ 25 billion for enhanced coronovirus testing, $ 50 billion for Small Business Disaster Loan Program. Administration and $ 10 billion for emergency economic disaster loan grants. The House of Representatives is expected to vote on the measure on Thursday.

The initial $ 349 billion ran out in 13 days after its launch on April 3, and bankers point out that the proposed amount is 11% less this time around. In addition, more lenders, including fintech companies, have been allowed to participate.

Bankers are therefore already preparing to manage the expectations of candidates.

“We must have had some very difficult conversations with customers,” said Brent Beardall, president and CEO of the Washington Federal Bank, with $ 17.4 billion in Seattle assets. “I think we will definitely be back in the same situation again.”

Almost 5,000 lenders participated in the program’s first run. Businesses with 500 or fewer employees can borrow up to $ 10 million. Funds spent on payroll and basic operating expenses can be waived, while the interest rate for any unsaved portion is capped at 1%.

Lenders are expected to have dozens of applications ready for use when the SBA reopens its E-Tran platform.

“We had time to refine our process,” said Frank Hamlin, president and CEO of Canandaigua National’s $ 3 billion asset in New York City. “As we look at this new push that’s going to come, we’re thinner and we know we can get things through the portal faster. “

After a rocky start, the $ 9.1 billion VyStar Credit Union in Jacksonville, Fla. Has fully automated its application process and accelerated turnaround times, the president said and CEO Brian Wolfburg. Vystar reported 442 approvals totaling $ 19.5 million.

OceanFirst had $ 110 million in applications when the portal closed on April 16. Maher said his team, which responded to another 500 inquiries in recent days, plan to resubmit the applications as soon as operations resume.

“The demand is very high,” Maher said.

Atlantic Union Bankshares’ assets of $ 18 billion also continued to accept and process claims after the portal closed. The Richmond, Va. Company has 2,500 apps worth around $ 500 million ready to upload to the SBA’s E-Tran system when it goes live, CEO John Asbury said.

Atlantic Union, which was struggling to process a few hundred loans a day when the program launched, is expected to be able to process its arrears within five hours of its recovery.

“We’ll be ready to go from the get-go, and we’ll be very focused on getting as many loans in E-Tran as quickly as possible,” Asbury said.

Washington Federal also has 2,500 ready-to-use applications.

“Our waiting list is growing every day,” said Beardall. “The sprint didn’t stop for us.

While many issues were apparently resolved in the initial phase, bankers fear that a sudden flood of new applications could test E-Tran’s capacity and durability.

It is also not clear whether the portal will need to be adjusted to reflect the stipulations included in the Senate bill allowing more funding. The bill would have allocates $ 60 billion in loans for institutions with assets of less than $ 50 billion, with half of the amount going to banks and credit unions with assets of less than $ 10 billion.

Initial funding was approved on a first come, first served basis.

An SBA spokesperson was unable to respond immediately.

“There is a certain degree of concern as to exactly how they are going to operationalize” the set-aside markets, Asbury said. “How they’re going to do this, I just don’t know. We are going to be confident that it will work. “

“I’m sure the people at the SBA are looking at each other and wondering ‘How are we going to do this’,” Beardall said. “It’s definitely something I would like to know.”

Bankers, for the most part, were happy with the idea behind designated funding.

“I consider the intention of the (…) carve-out to be good,” said Charles Vita, Canandaigua’s loan manager. “Congress is trying to make sure the dollars get to the broad spectrum of small businesses across the country. … Everyone needs money, but small businesses certainly need it the most. They are the least capitalized.

Fintechs have been excluded from the exclusions even though most fall below the asset size thresholds in the Senate bill.

Ryan Metcalf, head of US regulatory affairs at Funding Circle, said he was “stunned” by the exclusion.

“If Congress really wanted this money to go to the smallest of small businesses, it could have demanded that the set-aside be for loans below a certain amount or for businesses with a certain number of employees,” he said. Metcalf said, noting that almost two-thirds of his company’s loans were less than $ 50,000.

“They decided that certain institutions could serve certain clients,” added Metcalf. “That does not make sense.”


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