ELLSWORTH — As a new week began, Tony McKim and other bank employees found one of the biggest hours of the year upon them.
Three days after Congress passed a bill providing $320 billion in added funding to the Paycheck Protection Program, American banks were eligible to process a new round of loans. The moment of truth came at 10:30 a.m. Monday, at which time the Small Business Administration was authorized to resume taking loans via its E-Tran platform.
“We have a whole bunch of applications right here and ready to go,” McKim, the president and CEO of First National Bank, told The Ellsworth American an hour before the E-Tran system opened. “As soon as 10:30 hits, we can get moving and start getting people their money.”
Such was a scene for banks across the country Monday morning as they prepared to assist businesses affected by the novel coronavirus pandemic. At a time of great financial uncertainty, those banks are working around the clock to make sure the new loans are distributed as quickly and efficiently as possible to those applying for them.
Since April 3, the Paycheck Protection Program (PPP) has allowed banks to issue loans to companies with fewer than 500 employees that meet Small Business Administration criteria and have tangible net worths of no more than $15 million. Sole proprietors, contractors and self-employed workers are also eligible under program guidelines.
Recipients of PPP loans receive funds equivalent to approximately 2.5 times their monthly payroll costs, though the amount of each loan is cut off at $10 million. Applicants must have been in operation as of Feb. 15 and are eligible for just one loan apiece.
Between the CARES Act, which issued $349 billion in loans, and the Paycheck Protection and Health Care Enhancement Act, passed last Tuesday, banks have been authorized to distribute $669 billion thus far. Yet the money doesn’t last long; the original $349 billion was exhausted in just 13 days, and the latest influx of cash might also be short-lived.
“We are worried that this one could run out very quickly,” said Renée Smyth, executive vice president and chief experience and marketing coordinator for Camden National Bank. “It’s a lot of money, but with so many loan applications, it’s easy to run through it.”
Smyth said Camden National will have processed more than 2,000 PPP loans after Monday’s batch, and McKim said First National was set to process 341 in addition to the 925 that had been approved in the April 3-16 phase. Those 1,266 loans total $107.3 million in funds, McKim said.
As soon as loan applications are submitted via the E-Tran process, banks have 10 days to get the cash to qualified applicants. Yet McKim said the applications, which are processed on a first-come, first-served basis, are often approved sooner than that.
“We’re able to get a lot of them out in about three days,” McKim said. “We have 11 people whose jobs right now revolve around getting these applications into the E-Tran system, and they were trained exactly for this moment.”
The loans are eligible for forgiveness under certain conditions. At least 75 percent of the funds must be spent on payroll, and the rest must be used to make mortgage interest, rent and utility payments over an eight-week span.
Businesses that use funds for other purposes will be required to pay back at least some of their respective loans. Those that have reduced full-time employment and cut salary levels by more than 25 percent for earners under $100,000 prior to Sunday will have forgiveness reduced if they do not restore those numbers to pre-Feb. 15 levels by the end of June.
“The real concern for a lot of people applying for loans has been that eight-week period,” Smyth said. “There are people asking, ‘What if I’m only partially forgiven? What if things don’t go back to normal?’ … There are a lot of questions they’re asking, and one of the most important things for us is being able to break it down into steps for them.”
As the PPP began issuing loans just one week after it was signed into existence, the first phase of loan distribution saw numerous hiccups. Yet banks will have more familiarity with the system as they process pending and future claims, and with some of the problems addressed, they are confident in their abilities to deal with the next round of applications.
“What happened is that the whole program was brand-new, and the SBA was getting rules from the treasury on the fly,” McKim said. “Now that we’ve been through that and that some of those kinks have been sorted out, I think this round is going to be a lot smoother.”
More applications are on the way; Consumer Bankers Association CEO Richard Hunt told CNBC that the SBA, which approved 1,661,397 loans from April 3-16, will process 1.3 million more during the ongoing round. Although that and the possibility of supplemental PPP funding down the line mean long hours ahead for local banks, McKim is confident they can meet demands.
“We’ve been so focused on getting it done, and I would say we’re doing really well,” McKim said. “There’s a lot of anxiety out there, and we’re going to do everything we can to get that money to these businesses as efficiently as possible.”