- The Treasury Department expects to begin approving and paying out applications for forgiveness from applicants for the Paycheck Protection Program (PPP) later this week, the agency said on Tuesday The Wall Street Journal.
- In the meantime, 10 trading groups – including the American Bankers Association (ABA), the Credit Union National Association, the Independent Community Bankers of America, and the Bank Policy Institute – wrote a letter calling on Senate and House leaders to take action to re-approve the PPP -Financing to say goodbye. The program was closed to new applications on August 8, leaving $ 130 billion unallocated.
- Banks expect more borrowers to inquire about commercial and industrial loans through another Federal Reserve facility – the Main Street Lending Program (MSLP) – over the next three months, but most don’t expect lenders to be in this time will be ready to lend more, the Fed found in a Poll published on Tuesday.
The Small Business Administration (SBA) has received more than 96,000 PPP loan waiver requests since the portal opened on Aug. 10, but has not approved any, William Manger, the agency’s chief of staff, told House lawmakers last week, the Journal reported.
“We received a number of applications,” said John Buhrmaster, President and CEO of 1st National Bank of Scotia, based in Scotia, NY. said American Banker. “It’s our turn in four to six weeks and we haven’t heard a word back.”
Some banks find it time consuming to process the request for forgiveness.
“It’s actually more complicated than any of us ever thought,” said Jack Murphy, president of commercial banking for Citizens Financial Group, at a Consumer Bankers Association conference Tuesday, according to the Journal. “It takes us two weeks to process an application. Four to six contacts between small business owners … and the people trying to process the applications for forgiveness.”
Other banks, including many of the largest in the country, have indicated that they are wait to see whether new guidelines or laws streamline the award process. They also want to see if Congress will pass a law that automatically enacts loans of $ 150,000 or less.
The latest PPP plan, enshrined in a stimulus package launched by the House Democrats, misses that by automatically granting loans of $ 50,000 or less and offering a simplified application for forgiveness for loans between $ 50,000 and $ 150,000 .
“If this is an opening salvo, this is a good first step,” James Ballentine, ABA’s executive vice president of congressional relations, told American Banker. “Our goal is for you to get something done before you leave town.”
Buhrmaster, meanwhile, said the $ 50,000 threshold “doesn’t make very good statistical sense,” as 85% of PPP loans would benefit from a $ 150,000 forgiveness.
Ballentine’s trading group and nine others named PPP “the financial lifeline” that more than 5 million small businesses “desperately needed to weather the start of the pandemic and economic deadlock” in their Tuesday letter.
“As these companies continue to recover, they will need additional resources to keep their business going, and PPP remains the most efficient and effective means to support them during this troubled time,” the groups wrote.
Chip Rogers, president and CEO of the American Hotel Lodging Association, was even more explicit in his request, according to American Banker. “We ask Congress to act on the parts that they can agree on,” he said.
While lawmakers have sporadically proposed several initiatives to restart the program – including some that would allow some companies to get a second loan – no one has composed himself.
Treasury Secretary Steven Mnuchin told a Senate panel last week he would support simplified forgiveness, but legislation is needed. He also suggested small businesses asking for forgiveness “act quickly and fill this out and not wait for laws,” the Journal said.
A Treasury Department spokesman said applications for loans less than $ 2 million are expected to be approved quickly.
About 84% of borrowers who last month from the. have been asked National Association of Independent Enterprises said they used all of the PPP funds they received. About 44% said they would apply for a second PPP loan if one were approved.
Back on the main street
Meanwhile, a Fed poll released Tuesday sought to find out why the Main Street Lending Program had such low demand. Approximately $ 2 billion out of $ 600 billion has been approved in the program, which has taken heat away from banks for the risk involved. The banks are on the hook for 5% of the loans made under the program. The Fed’s 95% stake in the loans was itself a compromise before 85% in one of three credit categories. Some have suggested that if the Fed took over 100%, more banks would get involved.
“Large groups of banks of all sizes indicated that loss sharing with the MSLP in the event of default is too insecure and the required certifications and covenants are too restrictive for the bank,” said the Fed in its survey on Tuesday. according to Bloomberg.
Nearly 75% of respondents said they had not made any Main Street loans or were not registered for the program. Banks that declined to participate in the program cited “their ability to provide non-MSLP credit to eligible borrowers and unattractive MSLP credit terms for lenders as reasons for not registering,” the report said.
Forty-four out of 86 senior bank loan officers surveyed said they had turned down some Main Street loans to companies that “were creditworthy prior to the COVID-19 crisis but too badly affected to remain viable and therefore unable to repay the loan “. Reuters reported.
About 68% said the program’s minimum credit threshold of $ 250,000 was not a major factor in being turned down for credit or enrolling in the program. Some lawmakers have asked Fed chairman Jerome Powell to cut this amount that the central bank has already done twice.