To participate in the CARES Act Paycheck Protection Program (PPP), lenders must quickly scale digital channels, workflow and reporting capabilities to accept new small business loans.
As many community and regional banks ramp-up to provide much-needed financial relief to small businesses in their communities through the $350 Billion Paycheck Protection Program (PPP) provision of the CARES Act, small business bankers and their tech support partners are asking many questions about the PPP.
While many questions cannot be answered due to lack of comprehensive guidance from the SBA and US Government, this article will shed some insight on basic early questions that bankers might have related to operational readiness to participate as a PPP lender. Questions include:
- “We want to participate as a lender, but how do we prepare for the flood of applications?”
- “How do we manage ensuring compliance to the loan terms and provisions of the PPP with a potential large number of new customers and loan volumes?”
- “How can we respond to this product opportunity without disrupting our other products, services and customer?”
Ultimately, a lending institution’s ability to participate profitably in PPP hinges on speed to process new SBA loans while mitigating the traditionally manual tools and processes that create bottlenecks especially with increased volumes.
Lenders that can quickly scale their digital channels, organization, workflow and reporting capabilities to accept a large volume of new small business loans will be in excellent position to provide the critical relief and stimulus to businesses in their communities.
Leverage Digital Channels
Most PPP lenders will experience “pain” with the SBA loan intake process, partly because of existing intake processes and tools that traditionally have several manual steps, combined with higher than normal volumes that will stretch manual processes and resources.
In an effort to mitigate this, your lending organization needs to leverage digital channels immediately to provide PPP information and support seamless intake of new small business loans by:
- Determining how existing digital channels could be scaled and/or dedicated for accepting input of PPP loan applications into systems of record. To the extent that PPP applications can be routed to specialized workflows will benefit the institution in managing the borrower’s urgency while allowing the institution to focus on new fulfillment and risk management activities.
- Considering the use of innovative solutions that can quickly digitize applications and documentation for streamlined underwriting, fulfillment and servicing. While core system providers are already rolling out solutions in response to PPP, there are other innovative solutions to consider, including RPA, artificial intelligence and distributed ledger or blockchain solutions.
- Ensuring public and internal websites are updated with information about PPP and other SBA programs your organization offers. Provide as much information as possible, so the borrower is informed ahead of application submission.
In the immediate-term, lending organizations will need to be ready for an exponential increase in PPP loan applications and documentation. This will be overwhelming for some institutions.
Aligning more resources can work in the short-term, but the increased volumes combined with potential employee absences due to the coronavirus, can impact smaller institutions from handling the upswing in loan volumes. Data entry and integration between systems that are not traditionally connected could produce bottlenecks, and will require more resource focus, or require an automated solution.
Your lending organization should prepare for organizational and workflow adjustments for new loan intake as well as ongoing servicing by exploring innovative solutions like a distributed ledger. A distributed ledger allows you to quickly enable secure and trusted workflow management of documents between lenders, borrowers and agents, which in turn bridges disparate systems and processes.
In the longer-term, your organization will have to determine how to manage and service PPP loans. While the SBA has not provided complete guidance on loan forgiveness, determining and implementing the operational and workflow requirements at intake will ease disruption when the loans are sold, forgiven or moved to servicing.
Enhance Reporting Capabilities
As with any Government program, PPP loans will require extensive reporting for both internal and external stakeholders and agencies.
While lenders have some time before full reporting is likely to be required, your organization should begin to plan now by developing capabilities and requirements to support ongoing reporting and analytics.
The SBA has provided high-level compliance regulations, but those will continue to evolve. Institutions will have to work closely with borrowers to ensure all terms and conditions are continually understood and met.
Both traditional and leading-edge technology solutions can quickly provide the secure and trusted connections between lenders and borrowers for managing compliance to the PPP terms and conditions while integrating directly with internal borrower business management platforms such as Office 365, QuickBooks, Quicken, and Salesforce, among others.
The current Paycheck Protection Program runs through June 30, 2020. Since the total available funds are capped, the SBA recommends that borrowers apply quickly, which means lenders must also be ready.
Realizing that speed to market is a critical factor, banks can’t sacrifice poor customer experience nor make bad business decisions just to participate in PPP. However, there are some relatively simple and quick solutions that can allow banks to participate quickly while allowing flexibility for adjustments as the program evolves and becomes better defined.