The nation has officially tossed its life preserver to small businesses.
Friday was the first day small businesses and sole proprietorships could apply for loans through the $349 billion Paycheck Protection Program (PPP), a Small Business Administration (SBA) program that authorizes forgivable loans to small businesses to pay their employees during the COVID-19 crisis.
Roger Beverage, president and CEO of the Oklahoma Bankers Association, said earlier this week that information about the PPP seemed to be changing by the minute.
“While banks are ready to start helping, it’s frustrating the businesses we want to help with the program are made to wait while guidance is still being written,” Beverage said in a statement.
Thursday, the SBA and the U.S. Department of the Treasury issued banks 31 pages of guidance on the process, said Sean Kouplen, state secretary of Commerce and Workforce and chairman and CEO of Regent Bank in Tulsa.
“The guidance given (Thursday) night cleared up a lot of structuring issues about how we’re allowed to structure the note and gave us a clear definition of what’s payroll, what’s forgivable,” Brian Schneider, CEO of Blue Sky Bank in Tulsa, said Friday by phone. “It allows our clients to have a little more clarity on what to expect.”
Kouplen said prior to that, “there were a lot of questions that were unanswered. I really want to give a lot of credit to Senator (James) Lankford. We had multiple phone calls. I shared a number of concerns with him about gaps that had not been communicated, yet, to banks.
“He did remarkable work. But there are still some liquidity questions that we are hoping to have answered.”
As an example, Kouplen used Regent Bank, which already has received about $100 million (PPP loans are capped at $10 million) in applications.
“That is just the tip of the iceberg,” he said. “We are a $700 million bank. So, you can only expand your balance sheet so much from both a liquidity perspective … and you have to have enough capital to support that kind of growth.
“I can’t do anything to put my employees and shareholders at risk. We’re hoping there will be some additional liquidity measures coming out to help banks continue to put on as many of these as we can without having those types of constraints.”
By about midday Friday, Blue Sky Bank had received about 60 applications approaching $10 million in requests. Schneider expects the applications to roughly double before the program ends June 30.
“It’s purely a guesstimate but hopefully we can deliver $15 million to $18 million of capital to the market, which in our eyes is much-needed,” he said. “It’s a very solid structure where it gives wonderful ability for the forgiveness of the majority of the debt. On the remaining, it’s very patient, very cheap capital that will hopefully help them get back on their feet.”
Because loans are being fast-tracked, the normally thorough screening process for borrowers will be abridged.
“We are relying on the Small Business Administration,” said Kouplen, whose bank by early Friday was closing in on 1,000 PPP applications. “They have provided banks with a 100% guarantee for this loan program. They have asked us not to do extensive vetting and just get the money out on the street.”
Schneider added, “there’s some clawback to the borrower if they misrepresent, but the key to that is that banks can rely on the borrower’s representation. We don’t have to verify all of this.
“That makes a big difference on the timing of delivery of this cash.”
The state has roughly 100,000 businesses and about 300 community banks, Kouplen said. Oklahoma also has 300,000 self-employed and independent contractors, he said.
“The vast majority of those quality for this program,” Kouplen said. “Only the very largest businesses don’t. Marijuana businesses don’t. But almost everybody else does. Honestly, why would you not apply? (Statewide applications) should be a very large percentage of that number.”
He urged Oklahomans to be patient with banks going through this lending process.
“Banks are not going to make much money on this at all,” Schneider said. “It’s not a money-maker. But we’re putting every spare person on this to make sure that we all do our part and contribute to our communities and make sure this capital gets out there so businesses can re-open their doors.”
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