The application period for small businesses to apply for loans via the Paycheck Protection Program (PPP), a CARES Act initiative, is over. Despite the ending of the application process, many small businesses are now intrigued by talk surrounding a possible new round of PPP.
Created in response to the pandemic, the PPP was designed to provide small businesses with fewer than 500 employees monetary support to keep employees on payroll and off unemployment. According to CNBC, as long as borrowers devote at least 60 percent of proceeds to payroll costs their loans will be forgiven, meaning that partial forgiveness is an option for small businesses who fell short of the threshold.
The program has approved and funded more than five million PPP loans totaling $525 billion across 5,460 bank and non-bank lenders. However, despite successfully keeping many Americans on payroll, the PPP has faced some challenges and criticisms.
“Some businesses were not able to secure funding for a variety of reasons,” explained Jack Leach, commercial banking practice leader at Cognizant. “Additionally, there were issues with the Small Business Administration’s (SBA) E-Tran platform as well as unclear guidelines, and even several high-profile companies that received funding but did not fit the profile of the small businesses that were the intended target. There were also issues with fraud which is always the case when large sums of money are involved.”
With the prolonged impact of the pandemic, another round of the PPP program is reputed to be coming soon which will include expanded eligibility criteria — increasing the number and types of borrowers — and even the opportunity for a second PPP loan for businesses whose revenues were impacted by more than 50 percent. However, there’s still concerns including efficiency in the loan orientation and forgiveness phases. There is even a pending proposal as part of a new round of stimulus packages for a streamlined PPP forgiveness process for PPP loans less than $150,000 which has created a “wait and see” approach for many small businesses.
Ultimately what will be needed to deliver a successful program the second time around are upgraded digital solutions. “Moving toward digital processes helps to better organize, ingest, and streamline information,” explained Leach. “This doesn’t necessarily mean eliminating all traditional and manual processes, but digitization is critical as both banks and businesses work to navigate, another PPP process and effectively compete in the post-COVID-19 environment.” Post-pandemic, the need for modernization – which comes as result of upgraded digital solutions – to benefit workflows and the customer experience will remain of the utmost importance.
While the PPP was successful in providing millions of loans there’s room for improvement in several areas. With the potential for another round of funding, loan origination, loan forgiveness, and loan servicing will restart. To manage these, and ensure success, upgraded digital solutions will be a necessity for banks helping their small business customers to navigate the continuing challenges presented by the pandemic.
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