Round 2 of the Paycheck Protection Program (PPP) kicks off today, as an additional $310 billion was approved last week to replenish the program and the Treasury Department issued new guidelines to help ensure more funds go to actual small businesses this time. The banks that prepared the best last time dominated the funding before it ran out. Alloy Labs Alliance members like Sunrise Banks and others were able to process significant volume and overcome significant challenges through a combination of technology and people power.
Those challenges included technical difficulties connecting with the SBA E-Tran portal and official guidance for compliance with the government requirements of the program that was late, often incomplete, and sometimes confusing or even potentially conflicting. All of that was further exacerbated by the sheer volume compressed into a short time frame. The SBA reported that they processed more than 14 years worth of loans in less than 14 days.
Last time the banks were the front door to the program as most fintech lenders were not yet approved to offer the loans, while this time the likes of Kabbage, OnDeck, Square and others are now approved.
In partnership with the American Bankers Association, Alloy Labs Alliance members have been sharing their best practices and lessons learned in a video roundtable series called Planning for the New Normal. April 20th, founding members John Schulte, Chief Information Officer for Mercantile Bank of Michigan and Chris Nichols, Chief Strategy Officer for CenterState Bank shared how they dealt with the challenges of the PPP and other issues stemming from the coronavirus pandemic. Watch the Video.
During the roundtable we asked attendees how many of their PPP applications they were able to get approved by the SBA before funding ran out, and 83% responded that 80% or fewer of their applications were funding. That indicates a significant backlog ready to be submitted for Round 2, and many observers are speculating that funding could run out even more quickly this time.
We also asked attendees for the top ways they were addressing challenges with the PPP. We were surprised that only 35% of respondents reported reallocating staffing from other areas to handle the volume and only a third reported staff working significant extra hours. What surprised us even more though, was that only 6% said they accelerated external technology relationships. Our experience with member banks indicated much higher percentages across all categories, and we'll be looking deeper at some of the different approaches and results as we continue our research and work in the industry.
New Priorities Emerging
We have also been working with banks to re-reprioritize their technology needs to meet these rapid changes, and 35% of respondents to our polling in the video roundtable said that Improving Digital Lending Capabilities was their top priority.
A stunning 0% of attendees indicated that they will be accelerating external technology relationships as a priority however, which was not at all consistent with what we're seeing with member banks and other industry leaders. Chris Nichols from CenterState talked on the the roundtable about deploying Robotic Process Automation (RPA) to assist with the process. Citizens Bank of Edmond also recently announced their partnership with MX to launch a new SBA application portal to remove the need for loan officers to manually re-enter loan application data.
Curious how your PPP submission performance stacked up? Take our 30 second survey to expand the benchmark data set. Results will be published on the Alloy Labs Alliance Pandemic Response page and in our Weekly Wrap email (sign up here).
One area of consistency was that the top new priority emerging now for roundtable attendees was planning ahead to handle forgiveness requests. Members have also prioritized getting ahead of that wave and are working together to develop a process that is consistent and compliant, and many are working with our partners at Crowe, who have put significant effort and resources into developing a process framework and workflow. Even banks building their own internal system will be well served by getting ahead of the requests with a good process.
What Comes Next? Life After The Crisis
Our third and final video ABA roundtable is coming up on May 5 at 3:00ET. As initial reactive measures take hold and the acute impacts begin to subside, we turn our focus to preparing for likely longer-term impacts for customers and on the industry. The biggest lesson we have learned from times of great and sudden change is that those who survive and thrive are those who adapt to the new normal quickly.
What will the ‘new normal’ environment look like?
How will customer needs and preferences change as a result?
Best practices for collaboration to share costs and risks
