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The Paycheck Protection Program didn’t exist a month ago.
Now, dozens of banks operating in Orange County have raced since its opening on April 3 to process loans geared toward helping small businesses stay afloat during the coronavirus pandemic.
Pacific Mercantile Bank of Costa Mesa said that as of April 15, it’s submitted 407 client applications for more than $237 million dollars that will keep over 27,000 employees on payroll.
“We dedicated a significant portion of our bank’s resources to support our clients during this challenging time with over 20% of our total loan portfolio committed to this program,” Pacific Mercantile Chief Executive Brad Dinsmore told the Business Journal.
The banks and other entities are participating in the Small Business Administration’s program, often known as PPP, which is providing $350 billion as part of $2.2 trillion stimulus package passed last month by Congress. The money can also be used for rent, mortgage, interest or utilities. The loan has a maturity of two years and a 1% interest rate. The loan will be forgiven if the employees are kept on the payroll for the eight-week period after the loan is made.
Interest by Orange County small businesses was widespread, bankers told the Business Journal.
Irvine-based Commercial Bank of California expects to issue $200 million in these loans, which is about a fivefold increase from its annual production of SBA loans. It received so many requests in the first four days that it suspended the application process for a few days.
“The response has been overwhelming,” CBC Chief Executive Ash Patel said.
“The stay in place has created a lot of pain. Every customer we’ve talked to has had an adverse effect on their revenue and has had to lay off their people.”
As of April 16, the $350 billion available officially ran out. At press time, Congress was in negotiations for $250 billion more.
“The bank has a list of prospective new clients that we hope to help if the proposed $250 billion dollar expansion to the program is approved,” Dinsmore said.
The biggest questions from borrowers involved the application that they found confusing such as whether to include contractors working on 1099s, Patel said. Furthermore, the SBA in its first week didn’t have all the requirements listed and sometimes changed them on the fly, he said.
The bank is telling borrowers to expect the funds within one to three weeks and is giving priority to borrowers who need to meet payrolls immediately. Typical SBA loans take about four to six weeks.
“We’ve prioritized those in severe need of cash. We’re trying to help our community as best as we can.”
The bank has seen a surge in customers asking for “payment holidays,” which the bank is considering on a case by case basis. At press time, it wasn’t clear what type of help the banks, which were large beneficiaries in the 2008 financial crisis, will receive from the government. Patel noted some regulations such as ratios of cash on hand may be relaxed.
Patel is an expert in the hotel industry, where his bank has issued many loans.
“The hotels, restaurants, travel industry are the most adversely affected” by the crisis, he said. “Most hoteliers we know have gone through major furloughs. There is no revenue.”
The payroll protection plan is separate from a forthcoming Fed program, called the Main Street Lending Facility, which will help businesses that are too large to qualify for help from the SBA programs and too small to receive aid from lending facilities the Fed is creating for large, highly-rated corporations.
The Business Journal’s annual ranking of the largest lenders of SBA loans begins on page 21. Since it’s a six-month snapshot that ended March 31, it won’t reflect the newer PPP program. See page 20 for more details.
What follows are comments from some of Orange County’s leading bankers:
EVP/Orange County Regional Executive
Head of Specialty and Commercial
City National Bank
While we cannot break out specific Paycheck Protection Plan loans for Orange County, I can tell you that as of press time, City National processed and received approval on 8,200 applications totaling $3.4 billion.
The initial tsunami of applications is now slowing down to a more manageable pace.
We have been working with our clients to ensure that they are completing the application properly along with all other supporting documentation. Once we have a complete package, City National is submitting them very quickly.
The documents haven’t been the difficult part of this program. Rather, it was the ever-changing guidelines by the SBA and having to ask the client for more information, which is why it’s important to have a relationship with a bank you trust and that understands your business.
Once the SBA provided the necessary guidelines, it was manageable, especially with our bankers helping their clients complete the necessary documentation.
City National has been receiving approval on its PPP loan application submissions in just a few days. It’s been a quick turnaround if everything is in order from the client. We have received numerous accolades from our clients for helping them through this tedious process.
City National is providing deferments. Each situation is different, so we look at each request on a case-by-case basis.
Our clients have received top priority from us in this new program, but we’ve also helped non-clients submit a PPP loan package.
Relationships are the key to City National’s success, so we encourage non-clients to bank with us, especially if there are additional programs like PPP and they want to be part of our exceptional white glove service.
Sunwest is actively participating in the SBA Paycheck Protection Program. We have been a preferred SBA lender for many years. As a result, we were early in providing content to our clients and communities about the benefits of the program. We also developed one of the first digital applications and launched it on Friday, April 3, in conjunction with the Federal program going live.
Since then, we have received over 2,000 applications. We processed 1,411 applications through the SBA and have approved and funded $100 million involving 50,000 jobs.
Our management team made the decision early on to assist as many businesses as possible in the communities we serve. Sunwest is the “Bank for Entrepreneurs, by Entrepreneurs”; and it is only fitting to assist as much of our community as possible in this difficult time. This decision became even more important when many larger institutions decided not to participate in the program.
To manage risk, we put stricter underwriting guidelines in place and are requesting additional documentation to mitigate potential fraud that could result from this program. Every business has been more than willing to provide this information and has been so thankful for the beacon of hope we are providing employees and entrepreneurs in our community.
Despite what you are hearing from many large institutions, the SBA and Treasury are trying to make this program as easy as possible for the banks to provide PPP loans to eligible businesses. Even with the additional documentation we are requesting, our team can process these loans in a matter of days or less. This has been helped by on our team working around the clock and our technology platform.
As the government pushed to take this program live, one of the biggest issues the program faced is larger banks move very slowly and there is a lack of entrepreneurism in our industry to tackle a fast-moving program like this.
I am so proud of what Sunwest’s team has accomplished in just over a week. Every individual across the company has been working countless hours to ensure we do our part in assisting as many businesses and their employees as possible. Banks have always been the center point of local economies, and we are proud to be in that role through this crisis.
Besides serving our communities with the PPP program, Sunwest is gearing up to be an active participant in the Federal Reserve’s Main Street Lending Program.
CommerceWest Bank is an approved Small Business Administration lender and is making Paycheck Protection Program loans available to its clients.
The SBA’s loan application form is a four-page application, so it is a relatively easy form for a business owner to fill out. We are recommending that our clients take advantage of the SBA’s PPP loan. It will give business owners the ability to keep staff on the payroll so that when the country is back to work, they will be ready to start back up without having to spend time recruiting staff.
As soon as we receive all required documentation, the bank is funding the PPP loans in three to four business days.
We are processing more than 600 applications; thus far, we have processed loans totaling $80 million. Our average loan size is $200,000.
We highly recommend that the proceeds from this loan be deposited into a new deposit account. That way, the payments made using the funds are easily documented. If a borrower will be seeking debt forgiveness, they must ensure that they are using the proceeds of the loan to pay employee salaries.
Only 25% of the loan amount will be forgiven for other purposes, such as rent and utility bills. If a small business is in the market for a PPP, it is advisable to start at your existing bank.
They will be able to process your application the fastest. However, if your current bank is not accepting applications, look for an approved SBA lender in your area.
President, Community and Business Banking
Banc of California
As one of the premier relationship-focused business banks in Southern California, Banc of California prioritizes high-touch service for business, entrepreneurs and individuals with best in class deposit and treasury management to term loans, working capital lines of credit and real estate loans.
As an SBA Preferred Lender, Banc of California also offers the full range of SBA products, and we are an active participant in the new SBA Paycheck Protection Program, which applies to businesses with 500 employees or less. Thus far, we have processed more than $120 million in loans.
Banc of California is also participating in the Main Street Lending program offered by the Federal Reserve for businesses regardless of size.
Our teams are actively working with our clients to discuss the PPP program and any other potential needs, and we have allocated additional resources to facilitate these applications. The funding can happen in days providing businesses access to much-needed funds.
The PPP documentation is straightforward for most clients. The most difficult part is computing an accurate loan amount, which may require additional payroll documentation. The SBA system has held up remarkably well given the unprecedented volume that is being processed.
As for loan deferments, every client situation is unique. We work closely with each client to understand the full financial picture and determine the best options.
Small businesses should know that time is of the essence. Some of our best successes occur when clients work closely with their relationship manager early and provide all necessary documentation in a timely manner.
As a relationship-focused business bank, we have the capacity and resources to significantly expand lending to businesses throughout Orange County. In fact, over the past few months, Banc of California has allocated additional resources to serve the Orange County community, including hiring a new head of business banking, Rocky Bandzeladze, and naming a new head of SBA, Sam Overton.
We are working diligently to help our business clients secure much-needed funds, and are working closely with each client to understand their full financial picture and determine the best options.
At Banc of California, we value the relationship we have with our clients. A small business owner should ask him or herself, “When is the last time my banker reached out to me?” If a small business owner doesn’t have that relationship, it may be time to reevaluate their options.