Lenders who participated in the initial rollout of the re-opened Paycheck Protection Program this week lauded tweaks and upgrades made to the process, saying the difference is stark compared to the first launch in April 2020.
"I would say it is much more organized than last time," Weir, Kan.-based CBW Bank CEO Suchitra Padmanabhan told S&P Global Market Intelligence. "I think the fact that they took their time to launch it really shows."
Padmanabhan said the Small Business Administration added an origination functionality to what was previously just its forgiveness portal. Being able to use that portal instead of an older one for loan applications has made for a vastly improved experience, she said.
"This new portal, its user interface is much better," Padmanabhan said. "The accessibility is also much better, so from a technology point of view, from a usability point of view, this new portal is much better."
Still, the new system was not without its flaws, the CBW CEO said. The bank experienced a few glitches in the early going due to technical parameter adjustments.
"I think that is the reason why they wanted to start with the smaller banks and institutions, so they could work through these kinks with a smaller group as opposed to having thousands of institutions hit it at the same time, causing a big crash," Padmanabhan said.
Initially, only community financial institutions — which include community development financial institutions, minority depository institutions, certified development companies and microloan intermediaries — could provide the PPP loans. The portal opened to banks with $1 billion or less in assets on Jan. 15, and all participating PPP lenders will be able to submit loan applications on Jan. 19.
The SBA hopes that limiting the lenders early on will "promote access to capital" to underserved small businesses, the agency said in a Jan. 8 news release.
"I think it's great that the SBA opened that window for community banks, to let that population of lenders and borrowers have a chance before an overwhelming crowd [shows up]," said Preston Thompson, managing director and co-leader of the PPP practice at Ernst & Young LLP.
Dominik Mjartan, CEO of Optus Bank, an MDI based in Columbia, S.C., said the community financial institutions are "kind of the guinea pigs — and that's OK."
Mjartan said there has been significant demand for PPP loans, with the bank's pipeline already filled with over half the volume it had for the entirety of the first version of the PPP. The SBA opened the PPP loan portal for first-time borrowers on Jan. 11 and for borrowers seeking a second PPP loan on Jan. 13.
Thus far, borrowers seeking second-draw loans have made up the majority of the applicants, Mjartan said, but Optus has also seen some new applicants "who didn't qualify or didn't apply before, so that's good news."
The Optus Bank CEO added that he was also pleased with the types of businesses that have sought out PPP loans this week.
"We see a lot of minority-, women-owned businesses, so that's great news for us," Mjartan said. "We want to be stepping out there, helping the most vulnerable people and places."
Similar to Optus, most of the applications CBW has received have come from businesses seeking second PPP loans. But Padmanabhan said the bank has been reaching out to businesses that did not receive PPP loans in the first version of the program.
"A lot of the people who didn't sign up for the first-round loans were, unfortunately, the people who really needed them," she said. "Many of them are older individuals, [so we have been] getting on the phone and talking to them and explaining to them the process and kind of hand-holding them through the entire process."
In addition to the improved loan portal, comprehensive guidance released Jan. 6 will help this version of the PPP operate much more smoothly, according to Robert Klingler, an attorney with Bryan Cave Leighton Paisner LLP.
"We're so much better off this time around," he said. "It really is radically different."
Despite the enhanced level of detail in the new guidance, questions remain unanswered, especially around the revenue test that borrowers are required to pass to qualify for second-draw loans.
Businesses have to show a 25% drop in annual revenue, either by comparing one quarter of 2019 to the same quarter of 2020, or via full-year 2019 revenue to that of full-year 2020.
While the guidance mentions "gross receipts" as a determiner, a definition of those receipts is badly needed, practitioners said.
Alex Ginsberg, a partner at Pillsbury Winthrop Shaw Pittman LLP specializing in government contract litigation, compliance, investigations and transactions, urged companies not to be "creative" in their calculations via losses and deductions.
"I think the SBA isn't going to be receptive of that," he said. "I think we can expect a good amount of audit activity just on this one issue."
