Local lenders offering federal loans to help businesses cover payroll amid the COVID-19 outbreak have experienced a significant decline in demand for those funds.
That’s a dramatic turnaround from roughly a month ago when the Paycheck Protection Program was beset by problems and small businesses were scrambling to apply for funds while navigating obstacles that left many empty-handed.
“I’m not sure we’ve taken any (PPP applications) in the last three to four days,” Howard Bank President and Chief Operating Officer Rob Kunisch said.
A number of lenders, ranging from larger banks to fintech organizations, say they’ve experienced a decline in demand for PPP loans since Congress approved a $175 billion second round of loans earlier this month.
In some cases lenders have deactivated tools launched specifically to handle PPP applications.
“We closed our PPP application portal … because we were receiving very few new applications. This will give our team time to shift its focus to helping customers process applications for loan forgiveness,” according to a spokesman from M&T Bank, which has authorized 8,400 loans totaling more than $1.5 billion in Maryland.
In the initial crush of businesses seeking loans, Kunisch said, his employees worked 16-hour days, seven-days a week in order to process applications. In the weeks since Congress approved a second tranche of funding, however, the bank has only handled about 20% of the number of applications during the first wave.
Howard Bank is now prepping for another fairly hectic period as the first wave of businesses to receive loans are expected to seek loan forgiveness next month because borrowers need to apply for credit amnesty from the federal government within 60 days.
Lendistry, a fintech community development financial institution, said it’s still looking for businesses in need of PPP loans.
The firm, as part of Goldman Sach’s $10 million commitment of PPP funds via its 10,000 Small Businesses initiative, was tasked with providing loans to Baltimore-based small businesses, independent contractors and nonprofits.
Lendistry is targeting city enterprises who struggled to access PPP funds because they lacked a relationship with banks, which the Small Business Administration depends on to process applications. So far Lendistry approved more than 1,500 loans nationally totaling more than $83 million in PPP funds, according to the company.
“PPP loan approval is faster for well-documented applicants compared with just a few weeks ago. Furthermore, recent guidelines issued by the SBA have clarified and addressed many questions about loan forgiveness. Re-establishing employee teams is a key to regaining traction, and Lendistry stands ready to help,” Lendistry CEO Everett K. Sands said in a statement.
Through the Coronavirus Aid, Relief and Economic Security Act, Congress approved two tranches of PPP funding totaling roughly $659 billion since late March. The goal of those funds was to help businesses avoid layoffs during the COVID-19 crisis.
But the program struggled after Congress OK’d the first round of loan funds. Among the obstacles the PPP coped with were bigger banks prioritizing larger clients applications, major retailers receiving millions in loans, and businesses shut out altogether from the first round of funding.
A survey of National Federation of Independent Businesses members released last week indicated demand for PPP loans had slowed down. That survey found roughly 80% of NFIB members applied for a PPP loan, and that nearly 90% of those firms said the government had already provided those funds.
Correction: An earlier version of this article included the wrong title for Howard Bank President and Chief Operating Officer Rob Kunisch.