One day before they can begin processing applications for the Paycheck Protection Program, the federal government’s new business relief initiative, SBA lenders are working feverishly to prepare for an anticipated high level of demand for the loans.
"Both BB&T and SunTrust, now Truist, have already seen a tremendous amount of applications for not only our bank's payment deferral programs and immediate lending relief loans designed to help small businesses, but also a very high volume of questions regarding the recently passed SBA legislation designed to provide support for businesses in our community whose application process begins on April 3rd,” Charles Mattox, Truist’s Wilmington market president, wrote in an email Wednesday. “We expect this increased demand to continue for the foreseeable future."
The Paycheck Protection Program funding of up to $349 billion was included in the recently passed $2.2 trillion stimulus program known as the CARES Act. As the program’s name implies, the loans are intended for small businesses that want to keep their workforce employed during the economic downturn caused by COVID-19 business restrictions. Part or all of the loan amount can be forgiven if business owners use the money for payroll, mortgage interest, rental or utility costs to keep operations running.
While April 3 is the first day for lenders to begin processing applications from small businesses and sole proprietors, independent contractors and self-employed individuals must wait to apply until April 10.
Truist, one of the top SBA lenders in the Wilmington market, is not alone in fielding inquiries about Paycheck Protection and receiving early applications from customers.
“We’ve seen massive interest in it,” Jim Engel, CEO and president of Cornelius, North Carolina-based Aquesta Bank, said of the new loan program Thursday. “Basically, any owner whose business has shut down or been severely impacted is taking a look. That includes businesses that are still operating but whose business is down. The government is trying to keep workforces in place because it’s a lot harder to crank back the economy again.”
Engel estimated Aquesta – another top SBA lender in the Wilmington market – has received about 150 early loan applications that his staff will begin processing Friday. To manage the workload, Aquesta has made some personnel adjustments.
“We have reallocated people,” Engel said. “Our SBA group still busy doing regular SBA work. In terms of the more immediate crisis part of this, we have allocated some of our branch personnel to help customers with applications and have trained people in E-Tran [SBA’s electronic loan processing] system. We are looking at further automation, but have done nothing yet.”
At Aquesta’s Wilmington branch, both branch manager Jennifer Merritt and commercial banking market manager Rick Hunt have been trained, according to Engel.
Truist is also adapting its staffing to handle the new program demands.
"BB&T and SunTrust, now Truist, is rapidly re-deploying our centralized teams in order to work together to help our communities by standing up focused areas within the bank to help us respond to a very high volume of requests,” Mattox said in the email. “We are leveraging technology in order to stay in touch with our clients, as well as make it easier for clients to talk to our bankers and also to process their transactions digitally, through all of our channels.”
For example, said Mattox, the bank quickly raised the limits on its mobile deposit capabilities so customers can deposit larger checks by taking pictures with their smartphones.
“While just one example of many, this allows our community to continue to transact business safely with Truist, without having to physically come to the bank," Mattox added.
Live Oak Bank, the nation’s top SBA lender by loan value, is still in the process of organizing for the Paycheck Protection Program, and was not ready to comment, according to spokeswoman Claire Parker. But the bank’s disaster loan web page
has information for companies that want to apply for program funds. It has also posted an information sheet
on both the PPP and the SBA's Economic Injury Disaster Loan program.
Time is of the essence to get loan applications into the pipeline, according to a U.S. Department of the Treasury program fact sheet
“Although the program is open until June 30, 2020, we encourage you to apply as quickly as you can because there is a funding cap and lenders need time to process your loan,” the fact sheet states.
Because Congress was determined to develop stimulus legislation quickly, many parts of the CARES Act, as it was approved, lacked operational details. So, as SBA lenders prepare to process applications, they are having to adjust as the SBA modifies provisions of the program.
Self-Help Credit Union, with an office in Wilmington, is readying its branches for participation in the Paycheck Protection Program. The credit union, which is geared to the needs of nonprofits and small businesses, does not handle SBA 7(a) loans, but as an SBA 504 lender, it can participate in the Paycheck Protection Program.
"Self-Help, like other lenders, is waiting on final guidance from SBA so we can understand the application requirements and then we will determine how broadly we’ll be able to offer," Tracy Ward, director of the credit union's 504 Loan Program said in an email. "We think this is a powerful program to support small business' and nonprofits' ability to keep their employees on staff and paid for at least the next 8 weeks, and we hope all lenders will participate."
Mattox has been following the program modifications as they become available.
"It appears the process will be standardized by the SBA with the goal of getting businesses the Federal financial support that they need as quickly as possible,” Mattox wrote. “However, this is still a very fluid situation with shifting directions and guidance from the SBA coming out multiple times a day. All financial institutions are working hard to try to understand it."
Although all the Paycheck Protection Program details may not be finalized, it’s clear that the application process is designed to help businesses obtain needed funds easily and quickly, Engel said.
“These [applications] are definitely way easier [than 7(a) loan applications]. They are only two pages; the documentation requirements are significantly reduced, no collateral is required, there’s no SBA guarantee fee and the bank does not charge a fee,” the Aquesta president said.
As to predictions that the streamlined program will get money into business owners’ hands in a matter of days, Engel said he was hopeful that would be the case, although he has not yet seen the program’s closing documents and lenders will have to prepare their systems for those documents. The SBA, which used to require hand signatures for loan documents, will allow electronic signing of Paycheck Protection materials. And funds can be disbursed by wire.
“Long story short, I am hopeful that sometime next week we will be disbursing funds,” Engel said.
Mattox said he has had many conversations with local business owners about the new relief program.
"Many are looking for certainty in these uncertain times. There are things happening in the world right now that we cannot control as we do not yet know when this pandemic passes, or when stay at home orders will be lifted,” he said.
“We are encouraging business owners to engage with their banks and their financial institutions to learn more about these evolving lending programs, control what they can in terms of their business decisions and adapt to changing conditions quickly and rationally,” he added, “but most importantly, to keep the personal health and safety of their families and their employees as the most important focus at this point in time."