California North Coast lenders expect less demand for latest pandemic-relief loans
The general feeling among North Bay banks is that there will be fewer applications overall for the second draw of federal Paycheck Protection Program economic relief loans, the application period which opened this week. But they said some notable exceptions likely will be in the hospitality, hotel and restaurant sectors, which have been hard-hit by business restrictions over the past 11 months intended to slow the coronavirus pandemic.
On Monday, President Joe Biden announced additional changes to the second draw of the Paycheck Protection Program, opening a 14-day window allowing businesses and nonprofits of fewer than 20 employees to exclusively apply.
This two-week window opened on Wednesday and closes Tuesday, March 9, at 2 p.m. Pacific Time. (See details below on the new loans.)
Michael Sullivan, executive vice president and chief credit officer for Exchange Bank, said a majority of applications being seen today are first round borrowers coming back.
“We are also seeing a number of small dollar loan requests — some as low as $1,000 — from independent contractors, sole proprietors and small mom-and-pop businesses,” he said. “In the first round, some 76% of loan requests were under $150,000 and 48% were under $50,000.”
Sullivan estimated that some 1,000 applications could be submitted for the Second Draw, down from 1,800 in the first draw in 2020. Significant rule changes now apply that were not included in the first round.
The Santa Rosa-based bank has increased its use of social media and its website to reach out to these groups and increase participation. Minority and underserved business entities are among the high volume of small firms applying, Sullivan said.
“This is a virtual process with application forms obtained and submitted to us on line,” he said. “When borrowers send us their completed loan applications, a team of 20 experts reviews their documents, checks for errors or inconsistencies and sometimes asks for more information before sending them to the SBA.”
The bank is processing SBA applications in the order received, Sulivan said. Once lending officers review documents and the borrower signs the application, the SBA takes 24 to 48 hours to process applications and assign a loan number indicating that funding has been allocated. We then forward loan documents to the customer, usually within the same day. The receipt of funds can take a little longer.
Exchange Bank received hundreds of applications initially in round 1 and from 10 to 20 applications per day in round 2, Sullivan said.
Wells Fargo Bank
Wells Fargo Vice President of Communications Ruben Pulido said 57,334 PPP-1 loans totaling $3.8 billion were processed by the bank in 2020 with an average loan size of $66,832 representing companies with a total of 447,643 jobs. About 86% of loans (49,536) were for less than $100,000.
The PPP-2 round this year within California has seen some 34,069 applications submitted to date requesting a total of nearly $2.2 billion in funds and representing 239,091 jobs. So far, 8,249 loans have been funded totaling roughly $399 million with an average loan size of $48,382.
The total number of 2021 PPP loans and their worth are difficult to predict.
“We have seen the weekly total SBA guarantee velocity decrease by $9.5 billion (25%) vs. the prior week,” Pulido said. “He said one critical thing we learned since previous PPP rounds is that underserved communities did not get the support needed citing lack of awareness about the program, feeling overwhelmed by the program’s complexity and uncertainty about how to access the program.”
Starting in mid-February, Wells Fargo is conducting a targeted e-mail outreach to nearly 380,000 of our small business customers located in low-to-moderate income census tracts, or majority-minority census tracts, to increase PPP-2 awareness, Pulido said. This gives the bank an opportunity to summarize key PPP-2 eligibility requirements, provide direct links to our PPP information site as well as other resources that may be relevant to small-business owners.
To expedite the loan process, Wells Fargo assembled a global team of thousands of fully-dedicated human resources, including the hiring and training of about 2,000 contractors from outside the company.
Last July, Wells Fargo created an Open for Business Fund using gross processing fees generated from the government to provide capital and expertise for businesses hardest hit by the pandemic, Pulido explained. This includes significant support for Community Development Financial Institutions (CDFI), including about $250 million of the total $400 million program being set aside for CDFIs. Some 32 CDFIs across the U.S. have already received funding through Wells Fargo’s Open for Business Fund as another way to funnel capital and technical expertise into neighboring businesses.