New PPP angst: Waiting for SBA to sign off on loan forgiveness

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More banks, weary of waiting on legislative fixes, are moving ahead with processing PPP forgiveness applications.

Many of those lenders have become more frustrated by a lack of communication from the Small Business Administration.

The $1.6 billion-asset NexTier Bank in Kittanning, Pennsylvania, submitted the first of 95 applications on Sept. 15, while the $2.2 billion-asset First Choice Bancorp in Cerritos, California, has processed about 200 applications in recent weeks. The $1.4 billion-asset IncredibleBank in Wausau, Wisconsin, has submitted 50 loans since the forgiveness portal opened on Aug. 10.

Each is still waiting for a response from the SBA.

“We have not yet had a single one validated,” said Robert Franko, First Choice’s president and CEO.

“To our knowledge, no one has yet received forgiveness,” Franko added. “There’s no question borrowers are tired of waiting. We have an automated system and everything can be done online.”

The SBA, which is administering the program with the Treasury Department, declined to say how many applications it has received or approved. The agency has 90 days to review files and reach decisions.

Lenders have sought a number of reforms to the PPP, including simpler application forms and forgiveness for loans of $150,000 or less.

The ball remains in Congress's court — and that is not a promising reality for lenders. Proposed PPP fixes have so far been stymied by congressional gridlock over a new round of economic stimulus.

“Since there appears to be little movement on that legislation, we have been proactive encouraging customers to begin sending in applications,” said Dan Sullivan, business banking group manager at NexTier. About 87% of the bank’s 1,150 PPP loans would benefit from blanket forgiveness.

Treasury Secretary Steven Mnuchin told the House Financial Services Committee on Tuesday that his agency is “encouraging small businesses to apply and we're working with SBA to make sure that they can process those as quickly as possible.” He added that the Treasury “could provide small businesses tools to make [forgiveness] easy for them.”

The Government Accountability Office said in a report released Monday that the SBA had received roughly 56,000 applications as of Sept. 8. The GAO report did not mention any approvals, and other lenders said they know of no applications that have made their way through the review process.

“We’re not aware of any specific actions by SBA on submitted applications,” said Eric Asgeirsson, president and CEO of CPA.com, the American Institute of Certified Public Accountants’ business and technology arm.

The institute launched a forgiveness platform in July as part of a partnership with fintech Biz2Credit that has been used by at least 40,000 PPP borrowers, said Biz2Credit CEO Rohit Arora.

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The GAO report, citing concerns from trade groups, observed that a lack of clarity around forgiveness had resulted in “lender fatigue with the program.”

Borrowers feel the same way, bankers said.

“I’ve definitely noticed fatigue over the process,” said Michele Vervlied, director of SBA operations at Customers Bancorp in Wyomissing, Pennsylvania. Borrowers “definitely want to get this over with, but they want to do it in a way that’s the most beneficial for them.”

Bankers said the SBA's portal has been easy to use, which could encourage more lenders to submit applications.

“We are pleased with the platform,” Sullivan said. “It only takes a minute or two to process an application. They’ve done a great job of simplifying the process.”

But that could also create more anxiety if responses are delayed.

The Loan Source, a nonbank SBA lender which has acquired about 22,000 PPP loans from community banks, said about 1,000 borrowers are working on applications, an increase from 200 a week earlier, said Luke Lahaie, the company’s chief investment officer. The Loan Source is using a platform from Biz2Credit to handle its PPP portfolio.

PPP shut down on Aug. 8 after its lending authority lapsed. Congress is considering several proposals that would restart the program, but those are also idling as lawmakers struggle to compromise on other components of a wider stimulus package.

Lenders have been lobbying to end the legislative impasse.

More than 100 trade groups, including the American Bankers Association, the Independent Community Bankers of America and the Consumer Bankers Association, sent a letter to lawmakers last week urging automatic forgiveness for PPP loans of $150,000 or less. The coalition estimated a streamlined process would eliminate $7 billion in administrative costs.

Still, some lenders are advising borrowers to delay their applications because of the lack of communication from the SBA.

First Choice, for instance, is no longer encouraging borrowers to apply as it awaits responses for the applications it has already submitted.

And some lenders, like the $17.9 billion-asset Customers, had been anticipating legislative intervention before proceeding.

Customers is working with borrowers with loans greater than $1 million to prepare applications. The company will open its portal to borrowers with loans of $250,000 or more on Oct. 13. The remaining borrowers will be able to access the platform on Oct. 27.

The $1.7 billion-asset Southern Bancorp in Arkadelphia, Arkensas, is also in a holding pattern for the nearly 1,300 PPP loans it made.

“We’ve told our borrowers we think Congress will act, so we’re asking them to hold on,” CEO Darrin Williams said. “Most have been content to wait and hope for some kind of resolution.”

Small-business owners are not going to wait on Congress forever, which will force more lenders to make a decision on holding off or forging ahead, industry observers said.

Borrowers “are getting very impatient,” Arora said. — Additional reporting by Paul Davis

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Paycheck Protection Program Small business lending SBA Coronavirus Steven Mnuchin CPAs
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