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There are currently 3,174 lending agencies certified with the Small Business Administration (SBA) to release small business Paycheck Protection Program (PPP) Loans. A map of all of them can be found here.
Treasury Secretary Steve Mnuchin announced last night that any FDIC bank, credit union and FinTechs will be allowed to make a loan, in addition to existing SBA lenders. The list of approved lenders will continue to grow, as lending agencies certify themselves with the SBA through a “streamlined” process, according to Matt Coleman, Regional Communications Director at the SBA.
Lending agencies must go to the Treasury for an application form, and then e-mail it to the Small Business Administration, according to details found on the Treasury’s website. The application will be reviewed by the Office of Credit Risk Management at the SBA before the lender is approved.
Thousands of banks across the country have already been certified with the SBA, from community banks to large banks such as JPMorgan Chase, Bank of America, and Goldman Sachs.
“At least another 2,000 community banks are waiting to be approved by the SBA,” says Paul Merski, Group Executive Vice President of Congressional Relations and Strategy at the Independent Community Bankers of America.
Loans of $350k and under will generate interest of 5%, loans between $350k and $2 million will generate interest of 3% and loans greater than $2 million will receive an interest of 1%, according to a guide for lenders published by the Treasury.
This was designed to incentivize banks to give out more smaller loans, according to a spokesperson for Senator Marco Rubio.
The interest rate for loans that are not forgiven has been increased from to 1% from .5%, according to an announcement by Mnuchin last night. The CARES Act sets the government’s limit at 4%.
“The community banks asked for this relief to make the loans more viable,” says Paul Merski, ICBA’s Group Executive Vice President of Congressional Relations and Strategy.
Traditionally, SBA 7(a) loans have an interest rate of between 2.25% and 8% on top of the prime, depending on whether the loan has a variable or fixed interest rate, according to Matt Coleman, Regional Communications Director at the SBA.
Large banks have been struggling to open the application portal, and have faced criticism for restricting eligibility.
Bank of America began accepting applications for the PPP, yet limited customers to those with a business lending and deposit account, according to their website.
JPMorgan Chase is only accepting applications from small businesses with an existing account.
Wells Fargo has not yet launched an application portal, as of this article’s publication.
U.S. Senator Marco Rubio, who helped draft the legislation, has used Twitter to publicly criticize big banks for creating unnecessary hurdles for small businesses. This morning he posted a video on Twitter imploring the big banks to facilitate the loans, specifically asking them to remember the corporate bailouts of 2008.
“When you needed the country to help you, they did. Now the country needs you to help them,” he said in his video.
Community banks, instead, are looking for business, according to ICBA’s Paul Merski.
“Community banks already do half of small business loans across the country. They are well-positioned,” says Merski.
“We’re flooded with big bank customers today,” says Cynthia Blankenship, Vice Chairman and Corporate President of the Bank of the West in Texas.
Since the application opened today Bank of the West in Texas has received 240 applications or inquiries from existing customers and 500 from non-customers according to Blankenship.
“We’re taking care of existing clients first, [but] not turning new clients away,” says Blakenship.
Yet community banks don’t have as much money to put into the program, and cannot absorb remaining balances on the loan as easily as big banks.
“It’s not given that the secondary market will even exist. What I’ve been asking of treasury and federal reserve is for them to set up a facility at federal reserve to buy remaining loans off banks’ books,” says Merski.
Despite this, community banks are rising to the challenge.
“It is going to be labor intensive on our part. We are a servant of the community, we are willing to do that,” says Blankenship. “It is disheartening to see that other banks are not doing the same,” she adds.
