On June 5, 2020, in a rare display of bipartisanship, updates to the Paycheck Protection Program (PPP) were signed into law. Under the CARES Act, the Small Business Association (SBA) implemented PPP to combat the economic fallout of COVID-19. It provides small businesses with the necessary funds for payroll, benefits, rent, utilities and interest on mortgages. These loans can be forgiven under certain qualifications.
Aptly named, the PPP Flexibility Act is designed to ease some burdens on small businesses who still needed more leeway. Changes include:
- Reducing the amount of the loan needed to be spent on payroll to 60%
- Extending the period to spend funds to 24 weeks (ending Dec. 31, 2020)
- Easing rehire requirements
- Allowing borrowers to delay paying payroll taxes
- Extending the repayment term from two to five years if loans are not forgiven
While the August 8 application deadline remains in effect, these modifications can be a victory for small businesses. Lenders tracking the PPP process for their customers will need to take these changes into consideration, in addition to the compliance challenges and attention to detail the program demands. But using digital tools at an institution’s disposal can ease the process and ensure these loans are carried out, managed and forgiven as appropriate.
What Are PPP Lender Responsibilities?
Under PPP, lenders must perform a good-faith review of borrowers’ calculations and supporting documents for amounts eligible for loan forgiveness. Institutions are also expected to help verify payroll and nonpayroll costs, as specified in the loan forgiveness application. The “help” aspect of this expectation is important, as lenders do not need to independently verify the borrower’s reported information. Ultimately, accurate calculation of the loan forgiveness amount is the responsibility of the borrower. The lender then works with the borrower to remedy any errors or omissions identified.
To limit miscalculations, lenders should confirm the receipt of the borrower and submitted documentation. They should also review the documentation of the borrower’s calculations and confirm the calculation is correct.
Digital Tools of the Trade
To centralize and streamline the process, many steps can be automated through digital banking tools. From e-signing and uploading essential documents to providing a unique website allowing applicants to complete the process online, a detail-oriented digital strategy can make life much simpler for both the borrower and the lender. You might consider using the following digital banking tools for a seamless PPP process:
- Customer Relationship Management Software (CRM) can be an indispensable asset when managing PPP forgiveness. In addition to setting up case types to match a bank’s PPP process, you can house electronic documents, provide notifications based on case updates, identify and track all customers and bank associates involved and complete an electronic audit trail.
- Contact and Relationship Management enables you to specialize interaction types, set reminders and track appointments. It also facilitates identification of all customers tied to a PPP loan and related third party affiliates such as accountants or payroll vendor contacts.
- Campaign Management offers a multi-pronged benefit as you provide internal updates and informational marketing. You can target specific sets of customers and provide follow-up campaigns as needed.
- Sales and Referral Tracking is always a wise practice, as you can track new opportunities or customer needs while working on the PPP process.
- Credit Tracking empowers you to track the documentation needs for SBA PPP loans. This can include payroll documents, full-time equivalent employee documents and non-payroll documents. It can also be used to track the forgiveness application, SBA approvals and demographic information.
- Digital Flexibility ultimately facilitates the process overall. Easing communication with secure messaging and collecting attachments through digital make it easy for customers to interact with you securely and provide necessary documentation. Institutions can also create application forms and advertise with custom texts that include useful information and links to external web pages.
The Destiny of PPP
Institutions should continue to review existing rules and documentation requirements and anticipate processing modifications for PPP loans. Expectations laid out in PPP have already changed, and it is possible they could do so again. Altering limitations, interpretations for sole proprietors and forgiveness of other loan amounts could all be considerations prior to the end of the year.
Learn More About the PPP Process
For a more comprehensive overview of how PPP forgiveness works and a demo of digital features applied to the process, CSI held this informative webinar. With an eye on any changes and an attention to detail, these tools can more effectively put those businesses in need on the track to recovery.