Local Banks Prepare for New Round of PPP Loans
Image via flickr user Jernej Furman
The new stimulus package, totaling $ 900 billion, sets aside $ 284.45 billion for the second round of the Paycheck Protection Program (PPP2). While businesses and lenders say round one was unclear due to ever-changing rules, local lenders are optimistic about their participation this time around.
Dennis Woods, CEO of United Security Bank in Fresno, said his bank will participate in the second round of the paycheck protection program. They are on hold until directions are issued to lenders, but Woods is hoping they can start receiving requests soon.
“I guess by the end of the week we’ll know for sure what’s going to happen,” Woods said.
The debate over individual checks in the Senate is preventing the legislation from activating, he said.
The legislation spans almost 5,600 pages and includes rules on individual dunning checks. Until the final amount is determined for individual checks, banks will not have the full scope of the rules sent out regarding small business loans.
The maximum loan amount increased from $ 10 million in the first round to $ 2 million in the second round.
“It could take some of the bigger companies out of the competition,” Woods said.
While the second cycle of PPP may seem intimidating to some businesses, the legislation in this cycle promises tax deductibility for business expenses paid with PPP loans.
To be eligible to apply, companies must have 300 or fewer employees, have used up all of their first PPP loan, and have a quarterly loss between 2019 and 2020.
PPP2 will ban new applicants with non-profit status, including churches. New applicants can receive a loan if they have 500 or fewer employees. Individual owners, independent contractors and self-employed workers will also be able to participate.
Forgiveness is the same in PPP2 as in PPP1: you will be forgiven if the money is spent on payroll, utilities, rent, or mortgage payments.
Ciaran McMullan, CEO of Suncrest Bank in Visalia, participates in PPP2. He is very optimistic about the deployment with some experience to his credit.
“The last time the Treasury Department had to act extremely quickly. The ASB had to act extremely quickly. We now have all of that experience behind us, so I’m really optimistic this time around it’s going to be a lot smoother for both borrowers and lenders, ”said McMullan.
McMullan also believes the rules will be much clearer in the second round.
“I think it will all be better this time around, and I think it will be easier to understand and we are looking forward to participating,” said McMullan.
Another difference between PPP1 and PPP2? Work with a “fintech” partner, short for financial technology. This allows them to process their loans online and be much more efficient.
“We will significantly reduce the impact on our staff and create a much better experience for our borrowers. The first time around we had to do a lot of things manually, ”he said.
This time around, banks will be better prepared and make better use of technology.
“We were doing this with almost 50% of our staff trying to work from home,” he said. “We had staff preparing the loan documents around a kitchen table at home. “
“I think the community banks in particular – and I’m not just talking about Suncrest, I mean all of my colleagues from all of our other local community banks – have all done a tremendous and wonderful job in implementing the 1st cycle PPP. , and I think community banks are going to step up again in this second round, ”McMullan said.