Summary List Placement
In April, the US government launched the historic Paycheck Protection Program (PPP) to provide financial assistance to small businesses struggling amid the coronavirus pandemic. A staggering $659 billion was allocated to the PPP across two separate installments, with funds for the $349 billion first round being tapped out in less than two weeks. But uptake slowed during round two as larger businesses returned loans following public outcry, while complex requirements and murky loan forgiveness guidelines deterred small businesses from applying. At the program’s close on August 8, $134 billion was left undrawn.
Banks that acted decisively in deploying PPP loans stood to earn new clients and goodwill from regulators, as well as a slice of billions in loan fees. Despite early missteps, they achieved much of what they set out to do, getting $525 billion of much-needed aid to US small businesses. Some banks had hitches in their PPP loan applications, funds weren’t going to the areas that needed them the most, and larger loans were favored by several institutions—but most of these issues were mitigated or rectified by the end of the program in August. Now their objective has pivoted to processing loan forgiveness applications, a task that might be even more strenuous than approving loans.
In PPP Small Business Loans — the final of three updates — Insider Intelligence looks at how different lenders fared at implementing the PPP by examining the available data on PPP lenders’ approval patterns and providing insights into how loans were spread across top lenders, geographies, and industries as of the program’s end on August 8. We assess the program’s overall effectiveness in distributing aid to US small businesses, and look ahead to potential future initiatives as the pandemic continues.
The companies mentioned in the report include: Bank of America, BMO Harris, Citibank, Cross River Bank, JPMorgan Chase, Kabbage, KeyBank, M&T Bank, PayPal, PNC Bank, Truist Bank, U.S. Bank, and Wells Fargo.
Here are a few key takeaways from the report:
Banks had clear incentives to work fast, but they also faced unprecedented logistical challenges and uncertainty during the program’s first round, which contributed to some snags in implementation.
Demand for loans greatly decelerated in the PPP’s second round, despite Congress’s steps to alleviate concerns around forgiveness. Continuous revision of guidelines likely had the opposite effect, in fact, in making it harder for businesses to understand requirements. Still, banks made significant headway toward approving smaller loans in the program’s second round.
Chase and Bank of America came out on top with total approved sums as of August 8, with $28.35 billion and $25.56 billion respectively. Both volumes are significantly higher than the banks’ first round totals, in line with our expectation that some key players that lagged in round one of the PPP would catch up in round two.
BMO Harris, KeyBank, and M&T Bank had the highest average loan sizes among top lenders, while New Jersey-based community bank Cross River Bank and Wells Fargo had the lowest. BMO Harris did a better job than KeyBank and M&T in …read more
Source:: Businessinsider – Finance