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Coronavirus

Banks Adjust For Massive Program

By Jenny Callison, posted May 8, 2020
Wilmington-based Live Oak Bank made 5,000 loans in 13 days before a $350 billion SBA coronavirus loan package ran out of funds.
The SBA’s Paycheck Protection Program (PPP), designed to enable small businesses and nonprofits to retain employees and pay some overhead costs, has been a whirlwind experience for the participating banks.

The program, which ran through $350 billion in13 days, involved nearly 5,000 lenders nationwide and provided potentially forgivable loans to more than 1.6 million businesses in U.S. states and territories.
 
It was, according to a statement from Small Business Administration officials, an “unprecedented” effort that began with the agency assembling a brand-new initiative in one week, and processing “more than 14 years’ worth of loans in less than 14 days.”
 
A second round of PPP funding – $175 billion – went out starting May 4.
 
Several lenders reflected on their experiences with the new program.
 
Live Oak Bank, the nation’s top SBA lender in terms of loan amount, was one of the major SBA lenders that worked with the agency on the design of PPP. Since it launched April 3, “All 600 [Live Oak employees] have been going at it 24/7,” bank CEO and Chairman James “Chip” Mahan said after the first round of funding was released.
 
In that whirlwind 13 days before the $350 billion was gone, Live Oak made 5,000 loans for a total of $953 million. To provide a point of comparison, that’s four times more loans than the bank made in all of 2019. And it’s ready to move forward with another 131 applicants for $28 million, according to Mahan. Prior to the PPP launch, the bank had given more than a thousand of its SBA 7(a) borrowers a 90-day deferral of principal and interest on their loans, and Mahan noted that, through the CARES Act, the U.S. government will pay all SBA borrowers’ principal and interest for six months.
 
“That should give our customers some breathing room,” he said.
 
Smaller SBA lenders, like Self- Help Credit Union, with a branch in Wilmington, anticipated a flood of PPP applications, and got it.
 
“We received about $5 million of applications from Eastern North Carolina to help approximately 30 organizations in a little over a week,” Executive Vice President Tucker Bartlett said in early April.
 
Reporting later, after the program’s funds were exhausted, Bartlett said Self-Help had gotten SBA approval for 283 loans to nonprofits and small businesses with a total value of about $52 million. Those borrowers came from the various states SHCU serves, including North Carolina. Sixty-seven percent of the dollar amount went to nonprofits.
 
Cornelius-based Aquesta Bank also experienced an onrush of loan applications.
 
“The volume is huge,” President and CEO Jim Engel said in early April. “Initially, some big banks were not participating or, like Wells Fargo, were very limited. Others were not sure and delayed. Now that they are in the game, some of the overflow is slowing a bit. But, still, massive demand; more than expected.”
 
Aquesta, which has a location in Wilmington, received more than 150 PPP applications before the program launched, and began processing them on the program’s first day.
 
Because the program was developed in such a compressed time frame, there were changes and clarifications up until the last minute, frustrating many bankers.
 
“Whenever you roll out something of this scale in less than a week, there are going to be lots of challenges,” Bartlett said during the lending period. “Because they needed to get the money out quickly, SBA started the program without full guidance, which creates obvious complications. Overall, the SBA is being very nimble, given the enormity of the task.”
 
As Aquesta was processing its applications, Engel observed ongoing tweaks.
 
“Over time, the SBA seems to have taken more control away from [U.S. Department of the] Treasury,” he said. “This seems to slow the process. Also, the SBA reads the law narrowly and then applies its normal criteria when the law isn’t clear. This presents challenges as the SBA 7(a) provisions are much more restrictive than Congressional intent in saving businesses and jobs.”
 
The product of a merger between BB&T and SunTrust, Truist Bank also saw its employees working overtime (and flexibly) to answer the needs of its customers.
 
The first order of business was to gear up for the program as Truist, like other lenders, watched as the concept – and then the specifics – of the program take shape at the federal level. Truist’s technology specialists built what Chairman and CEO Kelly King called “an entirely new process” in a matter of days, making it possible for the bank to go online with its automated application process one day after getting the go-ahead from the SBA in the wee hours of April 2.
 
“In the first 48 hours, we received more than 100,000 applications,” King said in a statement. “Since then, we’ve pulled together in an extraordinary way, cross training thousands of teammates to help process the tremendous amount of applications more quickly. The vast majority of these teammates have worked long hours – oftentimes through the night and into the early morning hours – to get our clients the help they need. Many … have pitched in to perform document review or other responsibilities outside their assigned duties.”
 
Truist, which has a substantial presence in the Wilmington market, funded about $10 billion in PPP loans to more than 32,000 companies. Those companies, spokesman Kyle Tarrance said, have a combined workforce of more than 1 million people.
 
Lending platform development delayed Self-Help Credit Union’s entry into PPP lending for three days.
 
“Self-Help had to create a new lending program from scratch in less than a week,” said Bartlett. “We also asked about 20% of our staff to change what they were doing to help work on this program and to work nights and weekends. Considering that we had to do this with almost all of our staff working from home, this was incredibly challenging. I could not be any more proud of how our staff has responded to the call to help all of these small businesses and nonprofits.”
 
SBA lenders are aware that the first funding round of $350 billion left many small businesses and nonprofits without help, and some tweaked the second-round process. Self-Help, for example, wants to focus even more on reaching nonprofits and small businesses in underserved communities, and those run by people of color.
 
“We have increased our technical assistance to these organizations by providing tools and guidance over and above what is provided by the SBA,” said Bartlett.
 
Meanwhile, lenders are receiving messages of thanks from many borrowers. Truist’s Tarrance shared a small business owner’s note that came across his desk: “I started crying because this will keep my company going and 30 people will not lose their jobs. …You are making a difference in many lives.”

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