San Antonio Lenders Talk PPP And What's Next
The U.S. Treasury announced this week that all $349 billion of pandemic relief money for small businesses had run out.
Thousands of businesses across the country, unable to access the funds, are wondering what happens next.
The Small Business Administration’s Paycheck Protection Program, or PPP, is expected to get another infusion of funds soon, but in the meantime, what should people expect from banks?
This week should have been a good one for Janie Barrera, CEO of LiftFund. The community development financial institution lends to low-income small businesses that can’t access bank loans.
On Friday, when they found out they could lend under PPP, they started looking for money. On Monday morning, they made an announcement with Texas Gov. Greg Abbott.
Goldman Sachs was putting $50 million into Texas small businesses through CDFI’s like LiftFund, and “$25 million of that is through a collaboration between Goldman Sachs and the Liftfund,“ Abbott said.
Liftfund isn’t a bank. It relies on donations and pass through loans from larger banks to lend to the smallest and neediest businesses.
“It's a very big deal,” Barrera said.
Unlike banks — which had known for weeks they could make the loans — LiftFund found out the Friday before. Now it had $25 million for a single program, when it usually lends between $25 million and $30 million in a single year.
“Most of these small businesses that were coming through our portal are small businesses that are mom and pop shops who need a lot of hand holding to process those applications,” she said.
Ninety-five percent of the loan documents turned in were incomplete, she estimated. That didn’t help with an already developing bottleneck. So they brought on more staff. Her people worked around the clock Tuesday and Wednesday.
But then they got the bad news:
“The balloon got busted on Thursday, when it was announced that the SBA no longer had dollars available for this program.”
The loan money must go through the government-guaranteed PPP. In 24 hours they received 1,500 applications requesting more than $68 million, more than double what they had been committed to loan. And now they couldn’t loan it.
“It's been a roller coaster, '' Barrera said.
And in the end they were only able to secure nine loans for $800,000.
And now the stakes are so different for their clients, rather than the excited, upstart entrepreneur who had a big idea and just needed the capital.
“And now in this environment, it's not that at all. It's ‘how do we even survive?’ ” she said.
To keep morale up, they have an all hands meeting each week and talk about successes too. A client who got a loan recently sent them a photo of her newborn as they were discharged from the hospital.
Frost Bank CEO Phillip Green also talks about a success under PPP recently.
“They said, ‘You know, what it lets us do is it keeps 56 of our employees employed on a 40 hour workweek for eight weeks.’”
Frost Bank started completing loans two weeks ago, when the program first opened up. They said they helped 10,600 businesses access $3 billion in loans. That’s around $280,000 per loan.
“The thing that gets me is the amount of applications we took in 10 days was the amount of applications we processed in a year and a half,” Green said.
He’s proud that his team succeeded on 76 percent of the applications, but he knows there are still people who didn’t get through.
“You know, we feel bad about it. Even though I can tell you … we moved heaven and earth to get done what we did, he said. “I just can't believe we could have done anything else.”
Congress is expected to fund another round of funds. But applications are closed for now.
With Goldman and an additional $5 million from the Credit Human, LiftFund has $29 million they still want to loan when the SBA opens the program back up.
Both Liftfund and Frost are working through their backlogs and making sure each application already submitted is ready to go at a moment’s notice.
The two organizations recommend businesses who still want to apply to gather their documents now.
They also both said businesses should explore loans and programs outside of PPP.
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