Austin, Texas, March 31, 2020 – Now that President Trump has signed the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, community financial institutions are scrambling to make sure they can help small businesses in their communities tap into nearly $350 billion that will be available to help them.
Abrigo announced today that its market-tested Sageworks SBA Lending solution will streamline and automate financial institutions’ processes so they can quickly get capital into the hands of customers and members through the CARES Act’s Paycheck Protection Program, an expansion of the Small Business Administration’s (SBA) 7(a) loan program. SBA 7(a) lenders have been originating loans via Abrigo’s digital SBA solution with E-Tran integration for more than a year, and Abrigo has worked quickly to modify the solution to fit the new CARES Act Paycheck Protection Program requirements. Abrigo also has resources to help lenders learn more about the program, as additional details are released.
Financial institutions like Farmers State Bank in Harrisburg, Illinois, are already working with small business owners interested in applying for the Paycheck Protection Program and are using Abrigo solutions, including the Sageworks SBA Lending solution and Abrigo’s online loan application, to help handle the high volume of interest.
“We’re very fortunate that we have the Abrigo system,” said Chris Healy, President of Small Business Lending at Farmers State Bank. “We’re going to run 100% of the SBA Paycheck Protection Program loans through it.”
The Paycheck Protection Program allows SBA lenders to offer loans of 2.5-times monthly payroll, or up to $10 million, to small businesses, nonprofits, self-employed individuals, and contractors. Banks and credit unions should be prepared for an influx of new loan requests, based on the program’s wider pool of eligible applicants, looser eligibility requirements, the opportunity for loan forgiveness, and the difficulties that businesses across the U.S. are facing.
The SBA is expected to release formal guidance on logistics of the expanded lending program in the coming days. In the meantime, Abrigo is adjusting its SBA Lending solution to prepare for the updates so that financial institutions can be readily equipped to serve small businesses soon after the SBA’s release. Abrigo also has resources, including articles and webinars, to help financial institutions learn more about the Paycheck Protection Program and other SBA options for borrowers.
Farmers State Bank has been emailing customers and putting information about SBA relief loans on its website to help small business customers get a jump on applying without having to come into a branch. The response has been strong, with about 200 responses since Thursday. “We want to make this as easy as possible.” Healy said. Right now, Farmers State Bank has applicants provide preliminary information through an online application built using Abrigo’s Sageworks Lending Solution. Once the SBA releases an updated Form 1919, Farmers State Bank will be able to send a follow-up email to each borrower asking them to upload the required information remotely so the bank can quickly transmit the application to E-Tran. “It’s a great tool, especially in times like this when you don’t want people to meet face to face,” Healy said.
“Community financial institutions have always been the lifeline of capital to businesses in their communities, and they will play a key role in this Paycheck Protection Program,” said Abrigo President Jay Blandford. “Our SBA Lending solution will keep them from getting bogged down by duplicative data entry so that they can efficiently process applications and deliver funds quickly. Helping institutions learn more about the program as the SBA releases new details is another way we hope to help them during this coronavirus crisis.”
SBA 7(a) loans have been a popular choice of funding for entrepreneurs, start-ups, and small businesses seeking capital for their enterprise due to low interest rates and flexible terms. However, only about 1,700 banks and credit unions were active SBA lenders in federal FY2019, according to SBA statistics. As more small business borrowers turn to SBA 7(a) lenders to help navigate uncertain economic times, more financial institutions should take advantage of opportunities to streamline processes in order to take swift action in the expanded SBA 7(a) program at a critical time for both lenders and borrowers. Abrigo’s solutions and resources can help them get ramped up quickly for the new program so that lenders can maintain existing customers experiencing difficulty due to the coronavirus, and so they can acquire new customers.
While some details are still unclear, key aspects of the Paycheck Protection Program include:
- Raising the maximum loan amount to $10 million from $5 million under the current 7(a) program.
- Guaranteeing 100% of the loan by the SBA
- Risk rating of 0 (i.e., no impact to the allowance for credit losses).
- Waiving the requirement that borrowers have to show they cannot obtain credit elsewhere
- Expanding eligibility to nonprofits, self-employed individuals, sole proprietors, and independent contractors
- Deferring all payments (principal, interest, and fees) for a minimum of 6 months and a maximum of 12 months
- Forgiving loans based on loan proceeds used for of payroll, mortgage, rent, and utilities.