New Orleans-area lenders are preparing for the second round of funding in the Paycheck Protection Program to be exhausted soon.
By Sunday, over half of the $310 billion allocated for this round had been spent, according to the Small Business Administration. The program restarted April 27 after running out of $349 billion 12 days following its initial launch.
Fidelity Bank CEO Chris Ferris said Tuesday he expects the remainder of the PPP funding to last through the end of the week.
“I’d say very few of our clients that were eligible should be left out,” he said.
“If you haven’t yet filed, there may still be time to do so, but act now,” added Ron Samford, president and CEO of Metairie Bank.
The forgivable loans offer an eight-week cash flow to businesses that maintain full staff and salaries by June 30. Bankers say loans have been smaller in Round 2, which indicates that smaller businesses and self-employed workers are being serviced.
They might also have had disadvantages that could leave some of them out. Ferris said there are 342 incomplete applications in Fidelity’s pipeline.
Some of the smaller businesses with less sophisticated operations and independent contractors may be struggling to find the exact documents needed to apply for the loans. Ferris said he believes a significant portion may have applied for loans at multiple institutions and learned they are not eligible or received a loan elsewhere.
Fidelity Bank approved 883 applications for $122 million in loans in Round 1, and has approved 789 applications for $34 million in Round 2. The average loan amount in Round 1 was $93,000 compared to $79,457 in Round 2. The largest loan approved by Fidelity was $10 million, and the lowest has been $200.
As of May 1, Louisiana had 33,014 loans approved for $2.2 billion.
Samford said Metairie Bank still has 50 applications pending and continues to receive applications on its website. The bank has restricted applicants to those located in the greater New Orleans area.
“Some of those pending applications do lack the necessary documentation to submit for approval, and because none of us know how long the funding will last, I encourage everyone to make sure their applications are complete,” he said.
He said that by the end of Tuesday the bank will have obtained SBA approval for 730 PPP loan applications totaling $50.4 million. The average loan size in Round 2 has declined to $38,000 from $108,000 in Round 1.
“No question that smaller operations are receiving this much needed support in Round 2,” he said.
Larger banks say most of their applicants have received loans.
IberiaBank reported on Monday that as of May 1, the company received and processed 15,000 applications, and 99.8% of qualified loans have received SBA funding. Between May 1 and May 2, the bank received over 200 additional applications which are currently being processed.
The average loan size in Round 1 was $150,000 as opposed to $55,000 in Round 2.
“Smaller businesses made up a larger portion of the application pool in Round 2,” said Randy Bryan, director of business transformation for IberiaBank. “So, yes, they are getting more loans, but in our case, it is because we had more applications from smaller businesses this time around.”
He said the bank has processed essentially all loans from qualified borrowers who have submitted complete applications.
“We have no backlog, with the exception of applications that have come in over the past few days and we’re still processing those,” he said. “We never stopped taking applications and have been working with clients and non-clients on this program. We are also seeing completed applications come in during the morning and getting funded in the afternoon. There is money still available in the program, and we stand ready to keep lending as long as there are qualified businesses and money left in the program.”
It’s not clear whether there will be a Round 3. White House top economic adviser Larry Kudlow told CNN on Sunday that the Trump administration might consider getting additional money for more loans.
Ferris said he doesn’t expect another round immediately. The next federal stimulus package would likely be for cities and local governments, he said.
“I’m of the opinion that (federal officials) will stop and assess, particularly with cities starting to open up and businesses going back to work,” he said.
Banks are expecting to shift to the forgivable portion of the program, which the SBA has issued few details on. Also on the horizon is the Main Street Lending Program, a nonforgivable loan program set to be launched by the Federal Reserve.
Eligibility was just expanded to include businesses with up to 15,000 employees or up to $5 billion in 2019 revenue. That’s an increase from the prior limits of 10,000 employees or up to $2.5 billion in revenue.