Thousands of small businesses have spent the past month scrambling to join the Paycheck Protection Program, seeking an economic lifeline amid the fallout from the COVID-19 pandemic.
For the banks that help prepare those loan applications, the result has been a monthlong marathon to try to help their clients before the funding runs out.
“This is a mammoth job,” said Kim Capeloto, executive vice president at Clark County-based Riverview Community Bank.
The Paycheck Protection Program was rushed into existence as part of a massive federal COVID-19 relief package. The full scale of the operation didn’t become clear until it was already rolling out, Capeloto said, and the breakneck pace demanded an all-hands-on-deck approach to loan processing.
Even some of Riverview’s human resources staff were reassigned if they had loan servicing backgrounds.
“In normal times, this would be a multi-month process to roll this out,” Capeloto said. “There’d be guidance, procedures, all this stuff — but in this scenario, they needed to get the money out as quickly as possible.”
Hundreds of loans
Riverview processed more than 650 loans in a 10-day period when the program rolled out, Capeloto said, at a total value of slightly more than $108 million. The applicant businesses came from just about every industry, he said, although the restaurant industry stood out as a source of applicants.
Steve Kenny, president and CEO of Vancouver-based Columbia Credit Union, said his institution received 532 loan inquiries in the first few days, generating 337 applications. Columbia was able to get 215 of those approved before the funding ran out, for a value of about $26 million.
The size of the loans varied based on the applicant business, but Capeloto said 430 of the Riverview loans were for less than $100,000, typically going to small local businesses. The average loan size at Columbia was $172,000 as of Saturday, Kenny said.
The race to submit applications continued right up until the Paycheck Protection Program’s initial $349 billion funding pot ran out on April 16, less than two weeks after the program debuted. Capeloto and Kenny both described employees working late into the night in the final days before the cutoff — although nobody knew exactly when the cutoff would come.
“That’s how we found out the funding was gone — your application gets denied,” Capeloto said.
The pause didn’t leave the banks with much breathing room though, Kenny said, because there are still more applications that didn’t get processed in time. Columbia Credit Union kept working to get those applications lined up, under the assumption that Congress would appropriate more of the funding.
Sure enough, on Tuesday the U.S. Senate passed another coronavirus relief package that infused another $320 billion into the Paycheck Protection Program. The House followed suit on Thursday, and President Donald Trump reportedly indicated that he would sign the bill as soon as Thursday night.
“We’ve received enough applications from round one that at this point, we don’t plan on opening it for applications for round two,” Kenny said.
The banks expect “round two” to be another marathon session of paperwork, and it’s not going to be the last, Capeloto said. The loans are forgivable if businesses use most of the money to retain their staff, and the banks will play a role in verifying that the money was used within those parameters.
“We’re kind of being the ‘gatekeeper,’ if you will, for the (Small Business Administration) with this,” Capeloto said.
Other changing conditions
Banks are allowed to keep operating during the pandemic, but Capeloto and Kenny both said that their respective institutions have been telling employees up to work from home whenever possible. That proved to be a challenge at first, due to the need to make sure everyone had the necessary technology and proper security for financial transactions.
“You can’t just send somebody home with a laptop,” Capeloto said.
Customers have quickly adapted to remote banking, he said, with large increases in the use of existing technologies like online banking apps and mobile deposits, but the flipside of that has been a fivefold increase in customer call frequency.
Kenny described a similar situation at Columbia — the credit union has had to boost its call center staff from 16 people to 40. And even with customers switching to mobile apps, he said, the bank staff are still busy — mobile deposits still have to be checked and verified by a person before the bank can release the funds.
The Paycheck Protection Program loans have been the biggest shift in day-to-day operations for local banks, but there has been a sizeable surge in a second part of the finance world: mortgages. Historically low interest rates are spurring customers to explore refinancing options in record numbers.
Columbia Credit Union typically receives about 70 mortgage applications per month, Kenny said, but in the past month that number has increased about fivefold, and about 90 percent of the customers are seeking to refinance.
That shift isn’t entirely due to COVID-19 — rates were already low before the pandemic began — but the combination of low rates and financial uncertainty during the crisis appear to be spurring more people to apply.
“If you have a $500,000 mortgage and you save 1 percent on it, that’s a pretty big impact,” Kenny said.
