Local lenders prepare for fast and furious second round of PPP loans

BANKNEWPORT is among local lenders gearing up for another round of applications via the U.S. Small Business Administration's Paycheck Protection Program. / COURTESY FARRAR ASSOCIATES/DAVE HANSEN

PROVIDENCE – “A breath of fresh air” is how Leland Merrill, chief lending officer and chief operating officer of BankNewport, described it when the funding for small business payroll relief ran out.

A break in the constant funnel of 1,200 applications into the electronic portal for the U.S. Small Business Administration’s Paycheck Protection Program meant the bank could close the approved loans and dole out the funds. 

That break was short-lived; less than two weeks after the initial $349 billion allocation went dry, local lenders including BankNewport are gearing up for another flurry of applications.

In the hours after President Donald Trump signed the latest stimulus bill on Friday, which adds $310 billion for PPP loans, Merrill watched the number of new applications streaming into BankNewport soar.

- Advertisement -

“By Monday, I think we’ll probably have another 600 or 700,” he said. 

That’s on top of the 350 applications already submitted and ready to go, awaiting the next injection of funding.

Merrill said some of the kinks that characterized the first-round process – unclear federal guidelines, an over-trafficked web portal – would be resolved, making the next round much smoother and faster.

Carl Taber, executive vice president and chief lending officer at BayCoast Bank, also named lessons learned.

Chief among them was the bank’s work with its IT department to automate parts of the application process, allowing it to populate documents with information much quicker. The interlude has also given the bank time to “clean up” the 200 applications submitted but not approved under the first round of funding.

“We found in the first round that we had some quality control issues,” Taber said. “A lot of people were not completing the applications properly or not submitting the right documentation.”

Processing isn’t the only thing lenders anticipate will go more quickly in the second round; they also expected the money itself to run out faster.

Even the $60 million carveout for lenders such as community banks – intended to address disparities in the number of micro- and women- and minority-owned businesses able to benefit from the program – doesn’t mean the funding won’t go just as fast, Merrill said.

He noted that the SBA has been “pretty silent” on the set-aside, and questioned whether it would be possible to implement as intended given the rapid pace and demand.

Merrill also cast doubt on national reports that women and minority business owners were shut out from initial funding; the application does not ask for racial or gender information which makes it impossible to know what percentage of women and minority-owned business owners tried to apply or received funding, he said.

“All I have is a name and an address,” he said. “I don’t even know if it’s a man or a woman.”

At least some of that reporting is based on research about lack of banking relationships among these types of businesses, which posed a problem when lenders limited applicants to existing customers.

BankNewport never imposed such restrictions, accepting all applications including those from so-called “orphaned businesses” without a prior bank, Merrill said.

While BayCoast did not accept applications from non-customers in the first round, it planned to this time, with a priority on helping women and minority applicants, Taber said. The average $210,000 loan among the 572 loans the bank already submitted also suggests that unlike national banks that reportedly prioritized major companies, most of BayCoast’s applicants were small businesses, Taber said.

“We really think we performed in accordance with what the government wanted banks to do, which was help the little guys,” he said.

LISC Rhode Island, a nonprofit community development financial institution that primarily focuses on financing housing, is also considering participating in the second round of funds, according to Jeanne Cola, executive director.

“Since this crisis, we have tried to shift our focus to be as helpful as we can to get resources out on the street,” Cola said. LISC served as the administrator for a $2 million bridge loan program jointly funded by R.I. Commerce Corp. and BankNewport. Earlier this week, it teamed up with Citizens Bank to offer grants to small businesses, though the $175,000 fund was depleted a few hours after opening, Cola said.

Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com.

No posts to display