Credit Unions Apply Experience to New PPP Round
Many businesses are suffering more severely than they were last spring.
Credit unions were applying lessons from last year’s Paycheck Protection Program as they prepared for Monday’s launch of a new round in a new year with new conditions.
The $900 billion federal relief package enacted last month includes $284 billion for another round of Paycheck Protection Program (PPP) loans for small businesses. The loans are guaranteed by the U.S. Small Business Administration, and are designed to be forgiven in whole or part by the SBA.
Last year, about $525 billion in PPP loans were approved, including about $9.7 billion from credit unions.
Some credit unions reported that businesses are less anxious about the process than last spring, but more worried about keeping cash flowing.
“Most owners understand what they’re up against, unlike early on,” said Miguel Maldonado, SVP for business solutions at Randolph-Brooks Federal Credit Union (RBFCU) of San Antonio ($12.6 billion in assets, 921,071 members).
Conditions of San Antonio businesses cover the spectrum from doing well to getting by. Many have adapted through tactics such as relying more on curbside pickup, online meetings and contactless payments. And some closed, he said.
“Most are doing what they can to keep staff employed and customers happy while trying to stay afloat,” he said. “Most of the challenges we see are small business who are dealing with loss of revenue or who do not have easy access to funds, which is why those businesses need to continue to see relief efforts from the federal government.”
One of the largest credit union originators of PPP loans was Greater Commercial Lending, a CUSO of Greater Nevada Credit Union, Carson City, Nev. ($1.3 billion in assets, 77,511 members). It granted $583 million in last year’s rounds and was sitting on a backlog of about $200 million in PPP applications as 2021 began.
In Nevada, business owners are more familiar with the process, but for many their business conditions have deteriorated, Jeremy Gilpin, EVP for Greater Commercial Lending, said.
Last spring, the businesses had more working capital reserves; now those are eroded or gone. However, Gilpin said Greater Commercial Lending has not seen an uptick in business failures among its loan recipients.
“Without this round of stimulus, it would have been disastrous,” Gilpin said.
Last spring, RBFCU turned to a third-party to handle PPP loan requests: Newtek Business Services Corp., a publicly traded non-bank lender based in Boca Raton, Fla.
Newtek, one of the nation’s largest SBA lenders, typically pays partners referral fees. It originated $1.19 billion in PPP loans last year, including $30 million from 1,250 loans from RBFCU, which serviced some in house.
“Now that we have all the systems and communications in place, with this round it is more about when to flip the switch and start accepting inquiries from businesses,” he said. “We’re very much on the proactive mindset now because we have a better understanding of the PPP loan process.”
Tony Pica, vice president of business solutions at Navy Federal Credit Union of Vienna, Va., said his team helped more than 6,700 business members receive $165 million in PPP loans.
At year’s end, Navy Federal ($131.6 billion in assets, 9.7 million members) was updating its systems in preparation for the next round of applications.
“We understand that coronavirus and the current state of the economy has caused uncertainty for many small business owners. Our goal is to assist them with the best relief options available for their unique situations,” Pica said.
First Tech Federal Credit Union of San Jose, Calif. ($14.4 billion in assets, 609,682 members) originated more than 200 PPP loans for about $6.2 million in the initial rounds, and is planning to participate in the new round.
“The previous round had continuous changes that created a lot of confusion for borrowers and lenders,” Marito Domingo, First Tech’s chief credit and financial officer, said.
“While the forgiveness process has proven to be mostly smooth, there have been some instances of inconsistencies causing frustration for our members,” Domingo said.