What’s next for small businesses in PPP Saga

On April 3, the federal government launched an unprecedented program to funnel money to small U.S. businesses hit hard by the coronavirus pandemic.

The Paycheck Protection Program (PPP) is a $ 350 billion segment of a $ 2,000 billion federal stimulus package signed under the CARES Act earlier this month. Administered by the Small Business Administration (SBA) and processed by financial institutions (FIs), including banks and some FinTechs, the program offers loans to small and medium-sized enterprises (SMEs) worth twice their salary expenses. monthly. These loans do not have to be repaid as long as SMEs keep their employees on the payroll (or rehire employees who have been laid off).

And while the announcement of the program was greeted with great fanfare by contractors across the country, deployment was difficult to say the least. Plagued by technical issues, confusing processes, and lingering questions about the flow of funds and how the forgiveness phase works, the program has evolved more slowly than many would have liked, especially SMEs at risk. waiting for funds. Worse yet, more than half of Main Street SMEs doubted their ability to reopen once the pandemic has passed, according to a recent PYMNTS survey of more than 700 Main Street SMEs.

And, 13 days after starting the program, it may be about to end almost as quickly as it started. On Thursday, April 16, all of the $ 350 billion in funds initially allocated were pledged – as the program was hit by a tidal wave of nearly 10 million applications within days of its opening. Some of these requests have been approved; the vast majority were not. And even those who got approved took a while to see real dollars arriving in their bank accounts and are still waiting.

It’s not for lack of trying on the part of the country’s bankers, Dan Speight, CEO of Planters First Bancorp, said during his latest digital talks with Karen Webster and Ingo Money CEO Drew Edwards on the ongoing saga of the deployment of the PPP program.

While complaints have emerged about how banks, especially large banks, have made the lending program available and accessible to consumers, Speight noted, on the bankers’ side of the entire PPP saga, this has been a no-no -stop two weeks. working marathon for the whole sector.

“I don’t care how big the institution of the people I spoke to, especially in the state of Georgia and even in the big banks – people went to work to death trying to get these filled out. requests through the pipeline, ”Speight said. . “It’s been long hours and weekends since the start. It’s not a lack of effort on the part of any bank of any size, trust me.

Problems with the program

The big problem, Speight and Edwards agreed, will be the lack of funds, both for the companies that are still waiting for them and for those that have failed to get their applications under the wire before the program is over. short of money.

Ingo, Edwards noted, had actually secured financing for its loans this week, an effort aided in large part by the “team of lawyers” that Ingo employs and the fact “that we are a payments company.”

Edwards said the SMEs he spoke to did not report similar results.

“I was inundated with emails from friends of mine who are in small businesses, and none of them told me they got their money back,” Edwards said. “I had a friend that I tried to help refer to another bank because he couldn’t even get a response from his bank as to whether his request was or not. “

This friend was able to get an approved loan number from his bank, Edwards noted, but since the program ran out of money in less than two weeks, small delays could end up being the difference between getting a lifebuoy. rescue and withdraw from businesses for many still online.

And while he applauded Speight’s diplomacy in crediting banks of all sizes for their efforts in this area, Edwards noted that his anecdotal understanding of this process has seen consumers react more positively to the experience they are having. with their community banks than with the one they have. they’re having it with their larger counterparts.

“Community banks are closer to their customers and are essential to this effort,” noted Edwards.

What is necessary

But just as vital to these efforts, Speight noted, will inject more funds into the program – quickly if possible – because at the moment some companies have secured loans and others have defaulted for reasons that were largely out. of their control.

And these funds, he noted, are not meant to be an extension of money for those who have already received loans. For now, considering how quickly the program has run out, it’s probably fair to assume that they got what they’re going to get unless a whole new stimulus package is put in place.

He said, however, that his sincere hope, which Edwards echoed, is that before a much bigger effort is undertaken, a new infusion of PPP funds will soon be launched on the political front, as it will really be. the difference between surviving long enough to recover and deciding how to quit permanently. In addition, he noted, the government needs to help banks, especially smaller ones, which have recorded as many of these loans as possible on their balance sheets.

“It would be nice if the Fed opened up some facilities for liquidity purposes,” Speight said. “If there was a way to buy loans off the books of the banks, they could continue to do more as well. I imagine a lot of community banks like us are at their limits as far as we can go how far we can take them. “

Look ahead

Edwards noted that the biggest question SMEs need to answer, especially those that have received stimulus funds, is what their recovery plan is. Some businesses will bounce back right away. Other verticals – dining out and travel – will likely need to start thinking about their return plans now.

“If you were in a business [and] you don’t know if it’s coming back or how fast it’s coming back, you better start having a plan in eight weeks to rethink your business and rethink cost structures, ”Edwards said. “I think you can take a restaurant environment and create a new kind of environment, and that should be the new normal, and strong businesses will be sitting right now to figure out how to do that and make it more comfortable.”

While something like a grand reopening of the company is on the horizon, Speight and Edwards agreed that it would likely be a smooth opening to an altered landscape. And a lot of businesses will have to start thinking differently.

But to get through what’s to come, they have to go through what’s now first, which as the past two weeks has repeatedly demonstrated can be a situation that evolves from hour to hour.

And that’s why this conversation will likely be ongoing.



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