Lending & Credit Risk SBA Lending

Is it Too Late to Automate? How to Get Started with PPP Lending

Kylee Wooten

April 8, 2020

0 min read

Key Takeaways

There will likely be a second wave of additional funds for small business aid. CFIs can still take advantage of the program and begin automating PPP loans in 48 hours.
Automation is key to streamlining PPP loans and getting capital into the hands of small business owners quickly.
Leveraging a third-party means having a partner to navigate a very fluid situation.

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A fifth of the Paycheck Protection Program’s $349 billion in loans are already committed, less than five days after launching. Demand for PPP loans has been overwhelming, and many small businesses have been frustrated and disappointed to find that their bank does not offer the loan. Many hopeful participants took to Twitter to express frustrations with their primary lenders not lending or including caveats to borrower eligibility. Some have even filed lawsuits. More than ever, this is the time for community financial institutions to step up to the plate, automate PPP processes, and show small businesses that they are there to see their success all the way through. It would also be remiss in failing to mention that most community financial institutions want to help their local small businesses, but many are overwhelmed by the “how.” If your financial institution has been on the fence of deciding whether or not to jump into the program, it should consider these two important points. First, there will likely be a second wave of additional funds for small business aid. Second, there are solutions available to enable financial institutions to automate PPP loans in 48 hours. Financial institutions that take swift action now can quickly become the heroes their small businesses need.

Automate PPP loans in 48 hours.

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I’m late to the party – why should I automate PPP loans now?

The demand for PPP loans is extremely high. To meet the volume of needs, financial institutions can automate the lending process to get capital into the hands of small business owners quickly. There is an obvious emphasis on speed for this program. In fact, the Treasury just stated that the first disbursement of the loan must be made no later than 10 days after the loan is approved. No matter how proactive your financial institution is in gathering borrower documents, it doesn’t eliminate the fact that a lender will have to input this information later. Financial institutions must automate PPP loans to serve your local small businesses effectively and ensure they have the resources needed to thrive.

Manual data entry and re-keying borrower information are both time-consuming and prone to error, further delaying borrowers from receiving loans promptly. Automating PPP loans is mutually beneficial to both the borrower and the lender. By using a third-party system, such as Sageworks SBA Lending solution, lenders can provide a portal for borrowers to apply for a PPP loan directly through the financial institution’s website – especially beneficial during social distancing. Borrowers can submit supporting documentation and make eligibility elections directly through the website, and applicants and participants can e-sign directly through the online application.

For a PPP loan, eligibility is essentially equal to approval for the program. When the application is submitted, the lenders can provide borrowers with almost immediate feedback that they have been conditionally pre-approved for the loan, or that their application is under review if they are ineligible.

Creating an automated, digital process is critical not only for lenders’ immediate needs, but also for reporting weeks later, as loan forgiveness comes into play. In the Abrigo system, for example, lenders can report and track the PPP pipeline, and each application that comes through this program will be flagged that it came from the PPP, so it is easy to locate for reporting.

Once the lender has applied the decision to approve the loan, it will then move to the closing process, where the lender submits an application for guarantee to the SBA through the E-Tran portal. Abrigo customers are able to quickly push the application data collected directly into E-Tran, where the data will repopulate.

E-Tran, the SBA’s application portal, has been the subject of many frustrations due to technical problems and login confusion. If your financial institution wants to lend PPP loans, an important step early on in the process is to ensure that the institution already has an account set up through Capital Access Financial System (CAFS). If a lender is unable to access E-Tran, there are several steps to take to troubleshoot the issues.

Throughout the weekend, many financial institutions were unable to access E-Tran, due to the crush of applications submitted, which slowed the system to a halt. Monday, technical errors continued, as E-Tran was down for a good portion of the day. E-Tran is mission-critical for the PPP loan initiative to work. There is no way to know when it will go down or how long it will be down for. Although this is frustrating, if a lender is an Abrigo user, then he/she does not have to worry about losing data once it’s saved within the Sageworks SBA platform. When E-Tran is back online, the lender will be able to resume and push the data into E-Tran to be executed.

A partner to navigate a fluid situation

The Paycheck Protection Program has been a whiplash of events, to say the least. Continuous updates and guidance changes have been major hurdles for community financial institutions trying to get a handle on the program. Many banks and credit unions were left scrambling to begin processing applications after new borrower and lender forms and SBA program guidance were issued late Thursday afternoon, just hours before the program launch. With new requirements, forms, and general updates being provided each day, it can be difficult to keep your financial institution on top of all of the changes, in addition to managing the influx of applications.

Leveraging a third-party solution means more than simply digitizing the lending process. It also means having a partner to help navigate the changes and ensure your institution is prepared to meet the requirements of the program. Abrigo, for example, quickly modified its SBA 7(a) solution to accommodate PPP parameters, including updating borrower information forms from Form 1919 to Form 2483 and the Lender’s Application for Loan Guaranty, Form 1920, to Form 2484.

Leveraging a partner, such as Abrigo, means that your financial institution isn’t in this fight alone, and it doesn’t have to scramble when things change.