Lessons Learned from PPP Funding 1.0 ​

By Karen Thomas

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When times get tough, the tough get going.

As cliched as that may be, nothing could be truer as we look to community banks’ response to the Small Business Administration’s Paycheck Protection Program. There are nearly 5,000 authorized lenders today—thanks to the resilience and dedication of community banks.

With SBA reporting that it has awarded 1.6 million loans—or 14 years’ worth of loans—in less than 14 days, this flurry of fast-moving loan processing led community banks to get creative. It meant developing new process workflows on the fly, moving staff from their standard posts to PPP-related roles, deploying an “all-hands-on-deck” approach to processing requests, and working—quite literally—around the clock to ensure all loans were reviewed, approved and processed according to requirements.

“It’s like we were doing a complete engine overhaul and changing the tires while driving down the highway,” said Steve Domine, president, Minnesota community banking and senior vice president, national lending, at $2.5 billion-asset Stearns Bank in St. Cloud, Minn. “But we went into it with a mindset that we’re going to do all of them.”

“We’re a small shop,” added John Ramage, president and CEO of $84.6 million-asset First National Bank of Brundidge, Ala. “We weren’t braced for this or staffed for it, but we were doing it for our customers. In fact, my 73-year-old, semi-retired father has been out on the road closing loans.”

But, while community banks continued ramping up, funding dried up. Reports of hundreds to thousands of loans left in queue have come in from individual community banks, worried they were leaving customers in the lurch.

ICBA and community bankers have successfully advocated a funding extension—with $60 billion set aside for loans made by community financial institutions. This additional allotment should help community banks respond to pending customer needs, and the systems initiated in round one will serve them well in helping their customers navigate this second wave [see sidebar].

“People in our shop are more worried about the deals they didn’t get done than they are about the ones they did, and I think we’ll get them,” Domine summed up. “We’re going to deliver this at a level that no other industry could.”

ICBA will providing additional guidance around PPP extension funding as information becomes available. Watch for additional resources in our online support center.

Tips for Supporting PPP Customers in Loan-Forgiveness Reporting

Though SBA has not defined the specifics of loan-forgiveness documentation, community bankers can offer some guidance to their customers.

  1. Encourage them to set up separate accounts for PPP funds. The burden of documentation falls to the small business, so help them make it easier by offering a separate account that makes every transaction traceable and documented.
  2. Remind them of their responsibilities. Consider creating a separate document that explains forgiveness and what may be required. This could serve as a reminder that the loan isn’t a grant, and they need to fully understand its parameters.
  3. Emphasize quick-response timing. Urge customers to be proactive in providing information as soon as possible after the eight weeks, so they can earn their forgiveness quickly and have the note taken off the books.

Karen Thomas is ICBA senior executive vice president of government relations and public policy.