Despite frustrating delays early in the application process, loans made through the U.S. Small Business Administration under the Payroll Protection Program are starting to move into the hands of borrowers and pace of disbursements should quicken in the coming days, according to a community bank executive involved in the system.
“We’re just now starting to close and fund loans which I think you’re going to see a real upswing of activity there over the next week or two,” said Patrick Ryan, president and chief executive officer of Hamilton-based First Bank in an interview with NJBIZ.
Ryan pointed to the immensity of the $350 billion program and what he called “misaligned expectations” at the outset. “I think the administration came out and said this program is up and running we’re going to get money flowing in days and I’m not sure that was ever a realistic set of assumptions,” Ryan said. “But when I look back on what both the government and banking sector has done to bring this program online I feel like it’s a pretty impressive accomplishment in relatively short order.”
He acknowledged the difficulties but cited First Bank’s experience to illustrate the scale of the program. “I understand that for folks who thought they were getting their money a week ago it can be frustrating that it’s not here yet,” Ryan said. “But we’re at a point, just to take us as an example, we were a bank that was probably set up to do five SBA loans a year, and we’re getting to the point where we’re almost done with 500 of them in a week.”
Nonetheless, Ryan said he believes banks and the SBA have figured out what needs to be done and the focus is now shifting toward funding and documentation. So business owners should make sure they’ve got their applications in or are working with accountants to gather and provide all the required information.
“Loans are supposed to get funded within 10 days of getting SBA approval,” he noted, and many applicants should know whether they’ve been approved. But “it if it’s been several days and they’ve gotten no updates and they haven’t gotten SBA approval, they may want to be thinking about a Plan B, which probably involves finding a community bank that would be willing to help them.”
Once the loans are funded, Ryan urges business owners to keep careful records of their expenditures to meet the forgiveness requirements. He suggests opening a separate checking account for the loan proceeds that would be used just for allowable expenses. “That may make things easier when you’re going back in to try and figure out forgiveness, whereas if you put all the money in your regular account and you commingle it’s a little hard to track it that way,” he explains.
The heavy demand raises the question of whether the program is sufficiently funded. Ryan is not optimistic. “In the short run, the primary question is, of the folks that need it today, is there enough in the $350 billion that’s part of the Paycheck Protection Program?” he asks, “and the answer there is looking like maybe not.”
In fact, Congress is already considering the addition of $250 billion to the program, and while leaders of both parties believe the new funding is necessary, they have yet to reach an agreement. For the moment though, Ryan said the SBA loans should help.
“Most people are saying let’s try to get ourselves to the fall, see where we are and hope that some of the economic recovery solves some of the problem,” he said. “And then we can maybe ring-fence and be a little more targeted in terms of what needs to be done with the next set of stimulus.”