A Back to Business Article
By Jim Shields
We have helped many companies who qualify under the CARES Act, Payroll Protection Program, to navigate the loan process. The purpose of this article is to share what we have learned about the PPP, as of April 8, 2020.
Larger lenders have allocation limitations from the SBA or the treasury department. These lenders have either opted out of the program or have already filled their allocation.
We recommend that you contact the smaller regional lenders, such as community banks. They may have multiple officers in one city or across a region. These smaller banks, from $500 million to $10 billion in size, have allocations that are still unused. The smaller banks are using this opportunity as a business development tool, and they are welcoming new applications because they want to develop a new customer.
We have learned some practical information about the administration of this program inside the SBA approved banks. After you have submitted your application to the bank, these steps are going on behind the scenes:
1. It Takes Time for the Lender to Submit the Application
The lender fills in the application on a portal because of an SBA license. It takes about 20-30 minutes per application, which limits the number of SBA loans that the bank can apply for.
What you need to know: Just because you've submitted your application to a bank is not an indication of whether or not your SBA Loan Guaranteed Number has been issued. Call your bank to followup. There may be a problem with your application at the bank that they're not telling you. You may be in a queue that's far down the list.
2. What is Your Lender's Process?
It is essential to know that some banks are triaging applications by the size of the customer or the depository relationship, which means that larger customers are going first. It doesn't matter where you are in the queue. Smaller customers are going last. When that bank's allocation is exhausted, you are no longer going to get an SBA Loan Number and having your loan funded promptly.
What you need to do: After you have submitted your application, communicate with your bank to determine where you are in the queue and what their process involves. Time is of the essence because the funds provided for the Payroll Protection Program are going to be exhausted. To make sure that your application is handled quickly, communicate with your bank. Find out when they've submitted your application to the SBA and get confirmation that you have an SBA Loan Guarantee Number.
3. The Loan Documents Need to Be Signed Quickly
Once you have the SBA Loan Guarantee Number, there is a specific set of loan documents for this program. Banks are allowed to make changes to those documents in limited ways. Some banks are preparing those documents and having customers sign them in as little as 48 hours, which allows the funding to occur. Other banks are taking longer, and some are not even able to give a date for the documents to be signed.
What you need to know: The money under this program is not advanced until the loan documents are signed and approved by the bank. Even if you have an SBA Loan Guarantee Number, you have to sign the loan documents and the bank submit the request for funding.
It's critical to learn the details about your bank's process, how they handle applications, when you can expect to receive the SBA Guarantee Number, how long the loan documents take and when the loan funding will occur.
This article is part of the Back to Business Initiative from Shields Legal Group. Please visit the Back to Business page and submit your questions. If we can help you apply for the Payroll Protection Program, please reach out now.