Bankers are largely poised to get out of the paycheck protection program, even with legislators talking about extending the effort for the remainder of the summer.
Treasury Secretary Steven Mnuchin told the House of Representatives Small Business Committee last week that he was receptive to proposals to keep the PPP open beyond its planned August 8 expiration, while also suggesting that lawmakers use the program’s remaining funds of Should increase $ 131 billion.
Legislators are also working on a bill to give small businesses access to a new round of PPP funding when they have fewer than 300 employees and have “significant revenue losses,” Sen. Marco Rubio, R-Fla., tweeted on Tuesday morning.
While bankers still support the program conceptually, they are less enthusiastic about participating. For many, it is time to focus on PPP loan issuance, assess the status of forbearance, and pursue traditional lending opportunities.
“None of the bankers I spoke to have regretted attending, but we are exhausted when borrowers ask when their loans will be made,” said Robert Franko, president and CEO of the US 2.2 billion Dollar heavy First Choice Bancorp in Cerritos, California.
Although he still supports PPP, John Buhrmaster, President and CEO of 1st The National Bank of Scotia in Scotia, NY, said lenders to the $ 492 million asset bank were “absolutely” tired of working their way through the complexity of the program.
“This is a joint effort,” added Buhrmaster, referring to the 1% interest rate cap on PPP loans. “Given the time and the way in which we had to change the structure of our bank in order to produce these loans, this is not a profitable business.”
Banks receive fees for issuing PPPs, but these are offset over the term of the loan. The economy changed when recent legislation the time borrowers spend on PPP proceeds increased from eight to 24 weeks.
“At first these fees looked pretty good,” said Buhrmaster. “Now that it’s a 24-week program, the amortization of those fees is definitely not that attractive.”
Lenders have issued fewer than 500,000 PPP loans since May 30, according to data from the Small Business Administration. Almost a quarter of these loans are from non-banks, which make up about 15% of approved PPP lenders.
John Pitts, director of Plaid’s policy, blamed the numerous adjustments to the program’s rules since its debut on April 3 for the feeling of lethargy.
“Many of these adjustments were necessary and actually improved the program,” said Pitts. “There’s a lot of energy in there. Many lenders made several adjustments to keep up with the program, but those changes came at a cost. “
The same thinking applies to credit unions.
“There needs to be a set of rules and guidelines for everyone to know about the playbook,” said Geoff Bacino, a former board member of the National Credit Union Administration and now a partner at Bacino & Associates, a consultancy in Alexandria, Virginia. “For credit unions it was like drinking from a fire hose.”
The program went from his initial funding of $ 349 billion after only 13 days of operation.
New lending resumed on April 27 when Congress approved an additional $ 310 billion in funding. About 40% of the added funds remain almost three months later.
The program was originally intended to incentivize small businesses with 500 or fewer employees affected by the pandemic. Loan proceeds that are spent on expenses such as payroll, rent, mortgage interest, and utilities can be waived.
Bankers, meanwhile, are preparing in the hope that Congress streamlines forgiveness for smaller loans.
“We are so confident that they will [accommodate loans of] For $ 150,000 or less, we ask these borrowers to collect their documents and simply keep them, ”said Buhrmaster. “For borrowers over $ 150,000, we’ve sent them an application for forgiveness for them to fill out.”
While bankers seem burned out in identifying new borrowers, Pitts said they might be interested in offering new loans to existing participants.
“The Destiny Most Likely to Revive” [PPP] includes the opportunity to give companies that have gone through the program the opportunity to receive the amount of [funding] to cover a longer period than originally expected, ”said Pitts.
At the same time, bankers in a number of states are seeing a recovery in retail activity and a sustained surge in mortgage applications. They prefer to allocate more resources to these business areas.
“We’re starting again with regular business in San Diego,” said Franko. “That is good news.”