By Janet Garufis
Last week, Henry Dubroff stepped out of his usual pundit role to share his impression of the Paycheck Protection Program rollout. I echo his sentiments and agree that it has been “a nightmare for many small business owners.”
It has also been a challenging experience for many of your local bankers.
I am writing this to provide a community banker’s perspective on PPP from the lender’s seat and to tell all local small businesses: if you are eligible for PPP, you will prevail.
How were PPP bank lenders selected? Any bank who was already a certified SBA lender prior to the passage of the CARES Act was deemed to be a PPP lender. Qualified banks had two days to decide if and when they would be capable of putting a process in place for accepting applications so business owners could begin to apply on April 3.
What banks did not have was the final SBA guidance on what exactly the program was, who was eligible, how they would be qualified and what information was required to be gathered. In fact, around 10 p.m. April 2 we received an updated SBA guidance that included a revised loan application with a new set of lending parameters.
When banks opened for business the next morning, or over the weekend, they did so without approved SBA PPP loan documents or access to SBA’s e-Tran loan automation website that would be assigning the loan reservation number.
When Montecito Bank & Trust opened April 3, the demand for PPP loans was so extraordinary that we received over 1,000 applications in the first six hours; that’s about twice the number of business loan applications we process in a year.
Many of our peers, like Community West, have experienced similar demand and like us are working around the clock to accommodate our communities, quickly. Regulatory guidelines for bank capital and liquidity levels limit the amount that any institution can lend.
The primary reason banks may have stopped accepting applications on April 3 or in the days that followed was to assess the bank’s ability to lend based on the amount of capital and liquidity required to do so, in a safe and sound manner. All throughout last week, the SBA’s systems were experiencing significant slowness or downtime, further exacerbating the ability of the bank lenders to process the voluminous numbers of applications. Neither the SBA nor the thousands of banks across the country were ready to quickly distribute $349 billion in relief loans. It’s a bit like building the plane while you’re flying it.
Then, on April 10, the Federal Reserve came to the rescue with a solution for bank capital and liquidity constraints, providing Fed member banks with the ability to collateralize their Fed borrowing lines of credit with the PPP loans, thereby eliminating those loans from capital and liquidity requirements and providing the banks more capacity to lend.
So, as long as Congress and the Treasury appropriate as much as is needed in relief business loan dollars, we will be here to help. We have learned a lot in a week and the processes are getting more streamlined as there is more clarity about the parameters of the PPP program.
The SBA took their systems down over last weekend to do maintenance and things are running better this week. We have started funding loans as of April 10 and continue to expedite applications and funding as quickly as possible. So, although you may feel alone, we are in this together and we do want to help you by funding your PPP loan.
What can you do? Keep checking back for updates on bank websites; it is the most effective form of communication your bank has right now. Phone centers are overwhelmed with calls — more than twice the normal call volume with the same amount of staff. Use email channels to communicate or request information. I promise every banker is trying their best to get this accomplished. We really are in this together.
• Janet Garufis is the chairman and CEO of Montecito Bank & Trust.