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Limited experience with business lending was a key reason cited by banks and credit unions to stay out of the Paycheck Protection Program, according to a survey by the Massachusetts Division of Banks.
About half of the 161 state-chartered banks and credit unions responded to the DOB’s survey, which was conducted in mid-May.
Of the institutions responding to the survey, 17 percent did not participate in the PPP, including eight institutions that were not U.S. Small Business Administration lenders. Some of the institutions not participating had limited experience with business lending or did not offer business loans. One institution had not recently processed SBA loans and “didn’t think it was an appropriate time to start.” Another institution said it decided to focus on offering case-by-case relief to customers.
Four institutions that responded to the survey did not participate in the first round but did join the second round of PPP funding. One survey respondent participated only in the first round.
Almost one quarter of the survey respondents that did participate in the program used the Federal Reserve’s PPP Liquidity Facility, which was established to encourage participation. The Federal Reserve’s most recent report on the PPP Liquidity Facility shows that 26 Massachusetts-based institutions, including those with federal charters, have accessed the facility.
Participants cited several issues with the PPP, including technical glitches, a cumbersome process, late guidance, changing rules and concerns about forgiveness. The DOB noted that the recently passed PPP Flexibility Act would address some of the concerns for lenders and small businesses.
“What is clear is that this program is a lifeline for small businesses and banks and credit unions in Massachusetts communities are in the forefront of supporting these businesses and their communities,” the DOB said in its report on the survey.
Through June 6, the SBA reported that 106,575 loans had been processed in Massachusetts for $14.133 billion. The total loan amount has slightly declined in recent weeks as some businesses have returned loans. Nationwide, more than 4.5 million loans have been processed for $511.382 billion.
