PPP Loan Update – April 21, 2020

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By Alan R. Sasserath, CPA, MS

It’s been a while since our last update. Since then, many of you were either approved for the Paycheck Protection Program (“PPP”) loan or you were not. More fell into the latter category. For those that received it, congratulations. For you now, the work begins as to how to handle the forgiveness. That will be the subject of what we are sure will be several future emails. We will send our first impressions of the PPP loan forgiveness rules and process early next week.

Whether you were approved for the PPP loan or not seemed to depend as much on the bank that you applied with as anything else. At this point, everyone either loves their bank or hates them, depending on whether they received the PPP loan or not. Given the amount of money available and the number of applications, I don’t know whether that is a fair analysis or not, but in a lot of cases, it is reality. PPP round two funding will be an opportunity for the banks to earn credibility back. However, for some banks it may be lost for good. We discuss what you should be thinking about for PPP round two funding below.

One of the most frustrating parts of the PPP is that many banks have been operating under a shroud of secrecy. It was/is a mystery as to when they would start to accept applications, how the process would work (both internally and with the SBA), what the process was to get to the finish line (PPP loan funding) and where you stand/stood in the queue. It seemed like many of the banks kept, and continue to keep most of their team and customers in the dark as to the PPP loan process. As we discussed in one of our first emails after the pandemic started, communication is key in times of stress.

As we are hopefully on the precipice of round two of PPP funding, we thought we would give an update as to our impression of the first round of funding and what you should be thinking about for this round. Please keep in mind that these are our observations with no formal investigation into the process at any bank.

It seems like the banks that fared well in round one of PPP funding were the banks that were not afraid to roll up their sleeves and go through the required manual processes it took to get PPP loan applications loaded onto the SBA platform early on. I keep seeing the words “community banks” and “smaller banks” as those that fared well, but our impression was that it was the ones that rolled their sleeves up and powered through some of the manual processes early on in the PPP loan process, regardless of size. We saw this more at smaller banks, however some larger banks did this well too.

It is also our understanding that the banks got a late start hiring companies to develop software that would load loan applications into the SBA platform electronically and many of these systems weren’t up and running until late in PPP round one. In other words, by the time the software was ready to go, many of the smaller banks and some of the larger banks had already taken the available round one funds because they used the manual process mentioned above.

As for PPP round two funding, we would expect the application process to be much less manual and much more electronic as we expect all banks that went down the software path to be ready from the start of round two of the PPP program. Those banks that relied on the manual processes may be at a disadvantage if they are looking to process many loans during round two of the PPP. Understanding where you are in the queue will be very important in this vein.

One of the questions that we get is whether you can put in more than one PPP loan application or not. Our understanding of the process is the following:
1. You are permitted to apply at more than one bank for the PPP loan.
2. Once one of your PPP loan applications is input into the SBA platform, then any subsequent attempt to submit an application to the SBA platform will get bounced.
3. If by chance, the system fails and you are approved for more than one PPP loan, then you cannot accept more than one loan.

What should you do now? Try to find out where your application stands in the process. If you don’t get a satisfactory answer, consider putting in an application at another bank or a nontraditional lender. The reason that we bring up the nontraditional lender is that according to the Wall Street Journal, the new bill is expected to allocate $60 billion of the round two PPP funding to such lenders. Some banks that have had success are willing to take on new PPP loan applications under the condition that they will get your banking relationship in the future. We may be able to make a recommendation if you need another banking option.

As always, thank you for your time and please let us know if we can be of any assistance.

Stay safe and healthy.