Despite significant challenges, Massachusetts’ bankers say they hope their work processing thousands of small business loan applications in less than a week will help their customers survive.
Midway through the first full week of the Paycheck Protection Program, lenders across Massachusetts had received high volumes of applications while still awaiting guidance on key requirements for processing and closing on the loans.
“We’re doing everything we can to get this money back onto the streets and into the hands of small businesses,” said Joseph Baptista Jr., president and CEO of Taunton-based Mechanics Cooperative Bank. “I’m at a point right now where I can’t go further.”
With only one week from the creation of the $349 billion loan program to its rollout, banks and credit unions reported working late nights and weekends to prepare for and begin processing loans meant to help small businesses experiencing financial difficulties due to the coronavirus pandemic.
Even with the uncertainties and problems with the PPP loans, community needs have driven many lenders to commit to the program.
“The gratitude and appreciation from the people who have been approved – people are brought to tears in many cases because they’ve been trying to think about how to keep their employees on,” said Jodi Rathbun-Briggs, senior vice president and chief lending officer at Greylock Federal Credit Union.
‘Working Around the Clock’
Created as part of the $2.2 trillion CARES Act passed on March 27, the U.S. Small Business Administration Paycheck Protection Program is meant to encourage small businesses to keep employees on payroll at a time when non-essential businesses in Massachusetts and other states have closed. If employees remain on payroll or are hired back, portions of the loan could be forgiven.
The program went live a week later, April 3, after guidelines were released the prior evening, some different from what the SBA and Treasury Department had communicated earlier in the week.
Some lenders did not have their systems ready to start accepting applications on Friday. Others processed applications manually, but by Monday, April 6, were experiencing significant problems entering loans in the SBA system. Lenders also waited for guidance on what documents were required to verify the loan amount and loan repayment terms.
William Parent, who joined Envision Bank as its new president and CEO on April 1, said frustrations with the program were expected.
“Any time you roll out a program like that, as quickly as it’s being done, it creates lots of frustration in that everybody wants that immediacy,” Parent said. “The politicians who put the plan together at a high level want that immediate effect, and the bankers who are trying to make that happen and want to do the best thing for their customers are working really hard – and some are working around the clock – to be in position to get money out as quickly as possible.”
At the same time, Parent added, the loans are legal contracts with implications for lenders, agents and borrowers, who also hope to have some or all of the loan forgiven.
Despite the enormous task lenders face, Parent said the PPP should have positive outcomes in giving small businesses a resource to support employees, maintain jobs and pay rent.
Tough Decision: Participate or Not?
Not all banks and credit unions are accepting PPP applications. Some have partnered with financial technology companies, including East Boston Savings Bank and Florence Bank in western Massachusetts, which are referring small business customers to alternative lender Kabbage.
Chelsea-based Metro Credit Union is not accepting applications, though it is considering a partnership with Kabbage. For Robert Cashman, Metro’s president and CEO, the decision not to participate in PPP was difficult.
The state’s second largest credit union with more than $2 billion in total assets as of the end of 2019, Metro had little experience with SBA lending, Cashman said and is also working on a system conversion to build its commercial lending portfolio, he said. Without the infrastructure in place for robust SBA lending, Cashman said, it would have been hard to offer PPP loans.
“If we had tried to do these loans, we probably wouldn’t have provided the service that our members are accustomed to at Metro,” Cashman said. “We really felt we would be doing a disservice to our members and those in the community given our infrastructure is not currently in place.”
Even without processing loans, Metro employees are still assisting small businesses with the process, Cashman said, by answering questions, helping with documentation needed to apply to for PPP loans and offering referrals.
‘I Feel We Have a Duty’
Baptista, with Mechanics Cooperative Bank, said staff began preparing for the program as soon as the CARES Act passed. With small businesses concerned that the $349 billion would get used up quickly, Mechanics, which has about $605 million in total assets, started processing applications on April 3, eventually receiving more than 250 applications by April 7 for about $50 million.
“The sheer volume is mindboggling, overwhelming, insane,” Baptista said.
But even as staff continued to process applications and receive SBA approval, Mechanics could not close on the loans.
The morning of April 8, Baptista was still waiting to hear from the SBA what the loan repayment terms would be and what documents Mechanics needed to obtain to review payroll and verify the loan amount. Without this guidance, Baptista said, he would not close on loans that could jeopardize the bank.
But other rule changes have complicated the process, including new guidance that loans needed to be disbursed in five days – later changed to 10 – Baptista said, possibly affecting applications processed on April 3.
Diane McLauglin
Baptista could not say whether he would have done anything differently had he known about the uncertainties and inconsistencies from the SBA’s Washington office. The potential for limited PPP funds made processing applications a priority.
Mechanics also originally accepted applications from small businesses that were not customers but had to suspend those temporarily due to the volume of applications received.
“I feel we have a duty to the communities that we serve to take these applications and process them for all the small businesses in our communities, whether they’re customers or not,” Baptista said.
