First Oklahoma Bank releases status of Paycheck Protection Program
Small businesses impacted by COVID-19 are flooding lenders with calls and lining up to take advantage of a new federally funded loan program that aims to help them keep their employees on the payroll by offering low-interest loans that are forgivable.
Lenders, likewise, are sprinting to help borrowers understand the finer details of the Small Business Administration’s Paycheck Protection Program (PPP) loan, a $349 billion loan program, which officially launched on Friday. The PPP is part of the $2.2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act.
“In the first weekend of the program our officers have worked with 445 applicants for nearly $80 million in loans. In the last 48 hours, we have gained approval for 100 loans, totaling $32.2 million,” said Tom Bennett III, president and Co-CEO of First Oklahoma Bank.
To put that in perspective, Tulsa-based First Oklahoma Bank, which is the second-largest dollar-volume SBA lender in the state, had closed 28 SBA loans for $22.6 million on Sept. 30, 2019, which marks the end of the government’s fiscal year. The top 10 SBA lenders in Oklahoma had closed 305 SBA loans, totaling $119.6 million, in the same time period.
The bank has seen a surge in calls in recent days and is racing to get as many loans approved as possible before the SBA runs out of money. In the next 60 days, First Oklahoma Bank expects to process over 1,000 applications for SBA PPP loans that will exceed $100 million, which has never been done in Oklahoma, Bennett said.
Bennett said the bank has committed all its lenders, loan assistants, and SBA loan specialists to accept PPP loans and process them through the SBA’s ETRAN system, which is how the loans get approved.
“There is an enormous amount of interest in these loans from small business. Virtually every business and nonprofit has been negatively impacted by the coronavirus crisis and would benefit greatly from these loans,” he said. “The SBA normally processes $30 billion per year in loans. In the next 60 days they plan to process $349 billion. It’s a herculean task.”
Applying for the PPP loan is a four-step process. First, the loan applications must be properly completed and given to a bank that makes SBA loans. Second, the bank submits the application to the SBA on its ETRAN computer system. Once the SBA issues a loan number, the loan is approved. Third the bank needs to close the loan with the borrower and advance the funds.
Finally, starting July 1, the small business can apply to have the loans forgiven. If the business has used the proceeds for SBA-defined purposes, the loan will be forgiven. If the loan is not fully forgiven due to misuse of funds, the borrower has two years from the date of the loan to repay any unforgiven balance.
The PPP loans are designed to help small businesses and nonprofits with fewer than 500 employees. Eligible businesses include veterans’ organizations, tribal business concerns, sole proprietorship, self-employed individuals, and certain independent contractors. In some cases, businesses with more than 500 employees also may be eligible if they meet certain SBA requirements.
“Generally, this program aims to provide cash so workers can keep their paychecks. This directly gives local businesses cash, in the forms of loans, to help employees stay on the job. If the money is used correctly, the loans are forgivable,” said Bennett.
The loans will be 100% guaranteed by the government, and some, or all, of these loans may be forgiven if borrowers maintain their payrolls during the crisis and don’t cut wages of employees by 25%. To qualify for loan forgiveness, borrowers will need to prove that they have the same average number of employees on their payroll on June 30, 2020, as they had for the eight-week period between Jan. 1, 2020, and Feb. 29, 2020. Documentation is critical both upfront and when applying for forgiveness.
Eligible businesses will need to document their average monthly payroll and know how many people they had employed on Feb. 15, 2020. The deadline for application for the PPP loan is June 30, 2020. The loans have a two-year maturity, with payments deferred for six months.
The maximum amount a borrower can receive is $10 million or up to 2.5 times its average monthly payroll costs, whichever is less. The loans do not require collateral or personal guarantees from the owners.
“These challenging times require extraordinary efforts by everyone. We’re working hard to do all we can to help local small businesses survive the economic downturn and return to successful operation,” said Bennett. “I’m a sixth-generation Oklahoman and know that prior generations have overcome the Dust Bowl, the Great Depression and two world wars, and other crises. This is the time for our generation of Oklahomans to rise to the challenge to overcome this combined health and economic crisis. By doing so, we will survive, recover and set the standard for our children and grandchildren to follow. This is our moment to shine.”