AUSTIN, Texas–The CEO of one credit union here has written an op-ed in a local media outlet making offering recommendations to the Small Business Administration on how it can improve the Paycheck Protection Program (PPP).
The PPP is a $349-billion fund that allows businesses with up to 500 employees borrow funds to cover their payrolls. If the businesses fulfill terms of the loans, the loans are forgiven. But as CUToday.info reported most recently here, many businesses and lenders reporting bottlenecks.
Writing in the Austin Business Journal, Kendall Garrison, CEO of Amplify Credit Union, noted many businesses have attempted to apply to the PPP.
“I say ‘attempted’ because if you have, you may have discovered your financial institution has no SBA lending experience, or they do and are simply unwilling to extend these loans,” wrote Garrison. “For banks and credit unions that are accepting applications, you’ve probably heard they’re overwhelmed with inquiries and can’t even tell you when they’ll be able to process your application. That’s frustrating when $350 billion has just been made available to keep small businesses employing people, but those same business owners can’t seem to lay their hands on it quickly enough to make a difference. We desperately need to fix that.”
One Thing Missing
Garrison credited the SBA for the “monumental effort” that’s been involved in creating and administering the program, which has a streamlined two-page application that requires only a few supplementary documents.
“We’re only missing one more thing: equal simplifications for lenders in processing applications,” wrote Garrison. “SBA loans have always required rigorous processes for underwriting and documentation, as they should, given that it’s taxpayer dollars that create the guarantees lenders rely upon to make those loans responsibly. However, we’re now being asked to expedite a process that usually takes months into hours, with minimal releases in liability. So, if an ‘i’ is not dotted or a ‘t’ is not crossed, our institutions could be on the hook for millions in losses that would otherwise have been forgiven or 100% guaranteed by the SBA.”
Garrison said while SBA review is reasonable, but the risk lies in having one person’s interpretation or a paperwork mistake lead to potential noncompliance.
“To address this gap, we believe we need two things, the first and most immediate of which is for the SBA to issue guidance to lenders that good faith efforts to comply with documentation requirements won’t impact the guarantee,” wrote Garrison. “The SBA wants lenders to act quickly — and lenders want to do that to help business owners — but we can’t do it responsibly without assurances we aren’t putting the health of our institution at risk.
‘Serious Gaps’
“Second, we need the SBA to address some serious gaps in the PPP application. A simple application is only helpful to borrowers if it’s an application that can be efficiently approved by the financial institution,” Garrison continued. “Right now, that’s not the case, due to missing boxes for calculations of use of funds and other important details. While those changes won’t expedite processing for the applications already submitted, they would help smooth the path in the future if the program is expanded, as some have indicated it will be.”
Garrison added, “We want to live up to the assertions that business owners ‘can have money in their accounts in as little as a few hours,’ not only because it’s what these employers need to weather this storm, but also because many of these applicants are our commercial borrowers whose survival will keep balance sheets healthy. We aren’t interested in making money on this, we just need to be sure we don’t compromise all of our futures by making shortsighted decisions.”
Difference Between CUs, Banks
Garrison noted there are differences between credit unions and banks that can be seen in the Paycheck Protection Program.
“Having spent the last 10 years of my 40-year career in banking with a credit union, I’ve come to understand deeply the differences between banks and credit unions, and I’ve never seen it on display more than in this time,” Garrison observed. “While I’d never name names, I can’t tell you how many small businesses we’ve heard from who have said their bank is SBA-approved, but won’t do these PPP loans, ‘because they can’t make any money.’
“We’re going to make as many of these loans as we can, and we call on every other SBA-approved lender to do the same.”