As lenders awaited word Thursday on final approval of $310 billion in new authorizations for the Paycheck Protection Program (PPP), they had as many questions as answers about program guidelines.
But regulators and industry officials are providing some insight into what’s likely to happen with this second round of funding and with the processes of loan forgiveness and the servicing PPP loans in the coming months.
During a webinar hosted by Abrigo, Walter Lara-Figueroa, a Lender Relations Specialist from the North Carolina District Office of the SBA, said lenders should plan to book loans very soon after President Donald Trump signs the bill approving new funding.
Lenders already receiving notifications from the SBA should receive an email letting them know that E-Tran, the application portal for PPP loans, is open for business, Lara-Figueroa said. But those logged into E-Tran will also be able to tell by whether they are able to click on the box that allows them to start a PPP loan, he said. “My best estimate is that if he signs today, it will be available the next day,” he said. To sign up for lender notifications from the SBA, use this link.
Lara-Figueroa also recommended that lenders contact the SBA district office in their area to get information and training from lender specialists who can help them specifically.
Despite concerns that hundreds of thousands of applications from lenders are already queued up and will gobble up new funding immediately, Lara-Figueroa said that is not the case. “There is no queue,” he said. “All of the [lenders] are in a holding pattern, but it will be like rush hour in New York or Los Angeles. E-Tran might go through an overload period.”
The first round of funding left many lenders scrambling for guidance and the most up-to-date documents. During an Independent Community Bankers Association (ICBA) briefing webinar, Paul Merski, Group Executive Vice President of Congressional Relations at ICBA, eased lenders’ fears that the second round of funding would have surprise stipulations. While there is no E-Tran queue, per se, lenders are sitting on a lot of applications, so “they don’t really want to change the clarifications now,” said Merski. Many lenders have outstanding applications that were unable to be processed before funding ran out, and others have continued to accept applications in anticipation of additional funding. “People who already filed applications should feel confident that their application is still good to go,” Merski said.
The one known change to the second round of funding is an earmarked $60 billion in PPP loans reserved specifically for community financial institutions. While it’s unknown at this time how the SBA will be tracking the allotted funds, $30 billion will be allocated to institutions with less than $10 billion in assets, and another $30 billion will be allocated to institutions with $10-50 billion in assets.
Lara-Figueroa said during the Abrigo webinar that he anticipates the SBA will be able to monitor the amounts going to various sizes of institutions as the loans are approved. “I’m sure they’ll have some type of software to track that,” he said.
Lenders using the application portal to enter loans have unique identification numbers.
Sound Community Bank AVP and Loan Systems Analyst Christian Fobian said his financial institution has been working since the first round of PPP funding ran out to get applications ready in case more money came through. “With more banks participating, we’ll probably get less” than the first round, he said during the Abrigo webinar. However, the bank, an Abrigo customer, will be able to use technology allowing them to submit applications to E-Tran in bulk this time around, so he is hopeful the process will be even faster.
Lenders continue to have questions about when and how they will be paid the processing fees for PPP originations. During an “Ask the Regulators” webinar hosted by the Federal Reserve, SBA officials said they are still developing guidance for lenders on that issue, but in general, the processing fees won’t be paid until the SBA knows the loans are fully funded. With SBA 7(a) loans, lenders typically notify that a loan is funded via the SBA Form 1502, said Dianna Seaborn, Director of the SBA’s Office of Financial Assistance.
“We’ll expand on that 1502 system such that there’s a report you can do,” she said. “Colson is the fiscal transfer agent responsible for that activity. They will provide access to that portal and how you will log in. …We are building that process. Lenders will get that information on how to report that funding of the loan. Fees are earned when loans fully funded. Loans are expected to be funded one time.”
Other ongoing questions focus on the process for borrowers to receive forgiveness on loans – both for banks to evaluate the forgiveness request and for banks to be repaid by the SBA for the portions of the loans that are forgiven. SBA officials on both the Abrigo webinar and the Federal Reserve webinar said guidance continues to be developed beyond what has already been published in the Interim Final Rule and the Treasury Department’s FAQs.
“In general we’d require the borrower to certify to you that they’ve rehired the workers or maintained the payroll and provide the 941 report, payroll reports, the FICA depository from the bank – things that are evidentiary of the payroll,” Seaborn said.
SBA officials on the same webinar said they are also still working out the process for lenders to apply for loan purchases under the guarantees protecting them against non-payment. However, it is likely to be similar to the 7(a) loan program process for guarantee payments, they said.
Paula King, Senior Advisor at Abrigo, advised lenders to consider the long-term implications of taking on PPP loans, especially as it relates to the allowance for loan and lease losses (ALLL) or the allowance for credit losses (ACL). “Make sure you’re isolating these loans,” she said. “Make sure you code and track these loans so you can have separate loan pools.” She noted that PPP loans are risk rated at zero in applying capital requirements, and they are 100% guaranteed, even if there is a portion that is not forgiven.
Content Marketing Manager Kylee Wooten contributed to this post.
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