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As PPP funding runs out, Hunt says demand may be $1 trillion

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Banking
Friday, April 17, 2020
Depending on when you’re reading this story, funding for the Paycheck Protection Program (PPP) already might be gone.

That’s how fast the Small Business Administration has been providing delegated authority to lenders to disperse PPP loans. By mid-afternoon Wednesday, $5 billion in approvals was being granted every two hours.

And that $349 billion funding from the CARES Act actually has about $340 billion available now, as some previous 7(a) loans and SBA fees to lenders account for some of the difference.

Consumer Bankers Association President and CEO Richard Hunt said on a conference call that the program might need $1 trillion before it’s done.

“We think any hour now we’ll reach the $345 billion number, and we know, right now, there are at least 700,000 applications that our banks have in their possession that have not been sent to SBA for verification yet,” Hunt said. “We think at the end of the day we might need upwards of $1 trillion to satisfy the demand of America’s small businesses. That’s not a number we came up with – this is the demand we’re seeing from small businesses.”

One of the association’s member banks, BBVA, said that the applications it has handled would impact 312,000 employees at small businesses.

“We were madly working, 24 hours a day, for three days before (the launch) to make sure we had everything stood up,” BBVA USA Director of Business Banking Elizabeth Dobers said. “What we did in three days would normally take us a year to do.”

Dobers also said the bank’s access to SBA’s technology platform – which had been a major stumbling block since launch – has gotten better.

“It definitely has improved,” she said. “It was a little rocky in the beginning, everyone was adding users to the e-Tran system, and we were all jumping on it at the same time. It has steadily improved each and every day.”

Hunt had praise for SBA and the Treasury Department for getting the program off the ground in less than a week, although noting it “certainly has its glitches.” Right now, though, he said the focus is on getting more money into the fund as soon as possible.

“One of the things Congress needs to look at doing is replenishing that money as soon as possible,” he said. “And lenders and banks should not be given preference based on asset size.”

One of the issues which Democratic leadership in Congress has been discussing with Republicans is earmarking money for community banks, Community Development Financial Institutions, and women-owned and minority-owned banks.

“There are 4,700 lenders participating in this program, and we believe any small business has access to this funding,” he said. “It is a Herculean effort for SBA to process this simplified system. When you start adding parameters, that will slow down the process.”

Dobers said the bank has been crushed by applications, seeing five to 10 times what the SBA lender traditionally would see in SBA lending.

“We’re continuing to push forward. We don’t care that the money is going to run out,” she said. “We’re going to keep the pedal to the metal so we have applications ready for the next round of funding.”

CBA General Counsel David Pommerehn said that some of the risk for lenders on the use of their own notes had been alleviated because of the addition to the Treasury Department’s FAQs at the end of last week, saying lenders could use their own.

“Risk is a big question mark for a lot of lenders in this program,” he said. “They want to make sure they are doing everything correctly, and SBA will honor this forgiveness part of the program going forward.”

The goal, Hunt said, is to continue to help small businesses around the country.

“We are being inundated with loan applications, and the No. 1 goal we need to give to the small business person is funds,” he said. “It’s a need for speed. We’re entering the tens of billions stage (in dispersals). We want to get more done. … But that’s not the goal. The goal is hundreds of billions – quickly.”

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