The SBA Payroll Protection Program (PPP) has been making news headlines over the past several weeks. My blog post today dives deeper into this program which was created to provide funding for small businesses in the U.S. who have been impacted by COVID-19. PPP funds allow workers to continue to be paid.
Round one of SBA-PPP was launched on April 3, 2020, and provided $349 billion in funding. During this initial round of the SBA-PPP, lenders were challenged to comply with rules pertaining to application submissions and funding date requirements.
The initial CARES Act stipulation was to fund within 5-days of loan approval was unrealistic and the rule was changed to 10-days. SBA also required lenders to use the approved PPP loan application; however, the application was still in revision when the program rolled out.
Lenders met these challenges head-on and processed the equivalent of 14-years of loans in just 14-days.
Understanding the SBA-PPP loan application process
Many lenders leveraged automation from start to finish. A workflow to kick off the application process, a digital version of the SBA-PPP loan application including digital signature; another workflow for the credit approval process and then finally, robotic process automation (RPA) software for uploading loan applications to SBA E-Tran, and then, boarding loans to the core banking application.
Nintex customers leveraged this technology that resulted in quick approvals and funding.
During round one, local hometown lenders that used automation surpassed many of the larger regional institutions in processing and funding loans. The automation processes implemented provided an efficient approach that allowed lenders to respond quickly to small businesses impacted by COVID-19.
On April 27, the SBA-PPP was relaunched adding an additional $ 310 billion to the program. Day one began with restrictions.
When SBA opened its E-Tran application at 10:30 on the 27th, a new rule allowed for mass uploads only for backlogged applications from round one; and, lenders were required to have a minimum of 15K applications to be eligible. This minimum would be met by larger institutions that did not have automation in place during round one.
Some industry sources cite the SBA system as being the problem. When the SBA implemented a “patrolling” mechanism setting the pace for application uploads by the hour and setting a rule that banks could no longer use RPA software, this simply misdirected the issue.
Lenders are on the frontlines and are working around-the-clock to provide assistance to small business owners.
Loan forgiveness under the PPP and SBA Economic Injury Disaster Loan (EIDL) programs
Businesses that received loans under the CARES Act will have eight weeks to use funds, adhering to PPP guidelines, in order to be eligible for loan forgiveness. The loan amount was based on the business’s average 2019 monthly payroll multiplied by 2.5%. Loan forgiveness is based primarily on two months of payroll.
Both the PPP and EIDL programs provide partial and full loan forgiveness. PPP loans up to $ 10 million can be completely forgiven. EIDL provides forgiveness for up to a $ 10K loan amount and is automatically provided the funds were spent based on guidelines.
As with the approval and funding process for PPP loans, automation again will be leveraged to gain efficiencies and accuracy during the loan forgiveness phase. Lenders will be hard-pressed to process PPP loan forgiveness requests in a timely manner.
From the initial forgiveness request through final processing, technologies like workflow, document generation, e-signatures, and RPA bots will once again prove that automation is more important now than ever before in completing critical processes.
For additional information on these programs, click here to take you to a FAQ document provided by the SBA.
Want to learn more about how the Nintex Platform can help you through the PPP loan forgiveness process? Click here to request a live demo.