In April, the U.S. government launched the historic Paycheck Protection Program (PPP) to provide financial assistance to small businesses affected by the pandemic.
The PPP has provided an incredible $ 659 billion in two separate installments to date. Funds for the first round of $ 349 billion were exhausted in less than two weeks, while admission in the second round slowed – $ 132 billion has not yet been used – due to complex requirements and cloudy Guidelines for lending prevent small businesses from applying.
The PPP is an exceptional step in solving an unprecedented challenge for small businesses, and banks that act decisively in providing PPP loans can earn new customers and goodwill from regulators, as well as part of the billions in loan fees.
However, getting these rewards is not an easy task: banks are expected to quickly process and approve a variety of loans while processing applications based on availability. In addition, banks now need to devote substantial resources to processing lending applications, a task that may be more difficult than approving loans.
In addition, banks have campaigned for PPP, and small business dissatisfaction could also cost customers. Regulators, lawyers, and the media have accused banks of being too slow to accept applications, prioritize existing customers, and favor larger amounts of credit – though public criticism has eased in the program's second installment. In addition, small business dissatisfaction with banks' use of the bank switch program could result in 29% of small business owners saying that their opinion of their bank deteriorated after applying for a PPP loan, according to a survey cited by Greenwich Associates revealed by American Banker.
in the PPP Small Business Loans – The second of three updates – Insider Intelligence examines how different lenders have done with the implementation of the PPP by examining the available data on the approval patterns of the PPP lenders and insights into the distribution of loans among top lenders, regions and Sectors granted until June 30th. In addition, our next installment after the second installment currently scheduled to expire on August 8th will include final numbers and will be available free of charge to those who purchased earlier versions of this report.
The companies mentioned in the report include: Bank of America, BMO Harris, Citibank, Cross River Bank, Funding District, JPMorgan Chase, KeyBank, Lendio, M&T Bank, PayPal, PNC, Truist Bank, US Bank and Wells Fargo.
Here are some key findings from the report:
- Although the PPFA was enacted to address concerns about the program and revive demand, the continued revision of the guidelines was likely to have the opposite effect, making it difficult for companies to understand the requirements. However, in the second round of the program, banks have made significant progress in approving smaller loans.
- Chase and BofA prevailed with a total of approved amounts. By June 30, Chase had approved more than double the $ 14.1 billion he'd lent during the first installment of the program, while BofA had borrowed almost six times what we expected some key players to borrow who were left behind in round one of the PPP would catch in round two.
- BMO Harris, KeyBank, and M&T Bank had the highest average loan sizes among the top lenders, while Cross River and Wells Fargo had the lowest. BMO Harris did a better job of reducing its average loan size compared to the first installment of the PPP than KeyBank and M & T.
- Cross River, based in New Jersey, was by far the smallest bank among the top lenders and was able to lend an astonishing 215% of its total assets. The impressive performance of the Community Bank was supported by its partnerships with fintechs such as Kabbage and QuickBooks.
- In the second installment, the PPP was more successful in bringing funds to the hardest hit countries, partly because banks operating in these areas accelerated their pace of credit approval, although some differences can still be seen.
- The funds had a mixed track record of reaching the hardest hit industries. In some industries, a high need for finance was associated with a higher supply, for example in the healthcare sector. But some of the hardest hit industries, like lodging and food, didn't get the level of relief they needed.
In full the report:
- Combines official Small Business Administration (SBA) data with additional sources such as company filings and earnings calls, academic research, and analyst research to gain insight into how different lenders fared to implement the PPP by June 30.
- Examines PPP loan sizes and total lender fees, and examines total loans financed and average loan amounts for the best PPP lenders.
- Offers important insights from the analysis of approved loan numbers by industry and region.
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