By Joseph N. DiStefano
Originally appeared in The Philadelphia Inquirer.
Two-thirds of U.S. small businesses plan to apply for “forgivable” Small Business Administration loans under the government’s new Paycheck Protection Program, according to a survey by the National Federation of Independent Business. No wonder: More than half of the total indicated that they can’t last more than two months under the current anti-coronavirus lock-down without going out of business.
How do you sign up? Banks such as TD, Citizens, and WSFS, which have plenty of experience making ordinary SBA loans, have been giving their own customers the inside track on applications for “forgivable” Payroll Protection Program SBA loans since applications opened up Friday.
But they aren’t yet accepting applications from noncustomers, they and other bankers confirmed.
Republic Bank, based in Philadelphia, is being more inclusive. “We are taking applications from everybody, existing customers and new,” says Vernon Hill, the bank’s executive chairman, from its Center City headquarters Tuesday.
It is the only bank doing business in the region, among those contacted by The Inquirer, that says it is taking PPP applications from both customers and noncustomers. Banks make one fee for taking application and another one for servicing the loans.
Where are the new borrowers coming from? “We are getting overwhelmed with Wells Fargo customers,” Hill said.
North Carolina-based Wells Fargo, which has the biggest U.S. bank branch network, announced Sunday that it had stopped taking PPP applications.
“We are limited in our ongoing ability to use our strong capital and liquidity position to extend additional credit,” said CEO Charles Scharf in a statement. The bank has been under a regulatory order to slow its growth in recent years after it was assessed penalties for aggressive consumer lending practices.
Customers complain that some other big banks, including PNC, the largest based in Pennsylvania, have also been slow to accept all the applications received, even from customers. Wells Fargo and PNC have cut back their SBA lending since the last recession in the late 2000s.
Republic, with about $2 billion in loans, is less than one-quarter of 1% of Wells Fargo’s size, and has so far sent more than 750 PPP loan applications, for $300 million, to SBA headquarters for disbursement, Hill said.
Wells Fargo stopped collecting applications when they reached $10 billion in value. The company will donate its fees to nonprofits that help small businesses, said spokeswoman Crystal Dundas.
There are nearly six million U.S. businesses with between one and 500 employees, which the government invited to apply for PPP loans starting this week.
A much larger number of small businesses are independent contractors or have no employees besides the owners. SBA has encouraged those businesses to apply for PPP starting next Monday.
Congress voted $350 billion in taxpayer funds for the “forgivable” PPP loans, and U.S. Treasury Secretary Steve Mnuchin has said the government will raise more if there is demand.
As a preferred lender, Republic is one of hundreds of banks that can certify borrowers’ eligibility and loan size, and forward the two-page application and payroll records to SBA for payment.
“We are in a sweet spot,” said Hill. “We have had an SBA lending business for a long time, so we are experienced. And we are funded by our own deposits, so we have the funding.” (Republic has a larger-than-average current surplus of deposits to loans. The Federal Reserve plans a PPP loan financing fund for banks that need help fronting the loans, though they will ultimately be funded by taxpayers.)
“And I have a team that likes to do this,” added Hill, noting he has 15 lenders in Pennsylvania and New Jersey taking applications.
But where’s the money? Hill said no dollars have been disbursed or will be until SBA finishes “final operating rules” for the program.
Bank officials have been pressuring SBA to finish the job and get the money flowing as soon as possible.
When will that be? “We are waiting on final guidance from SBA today or tomorrow,” said Rebecca Acevedo, spokeswoman for WSFS.
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