Bankers: Biz Payroll Relief Coming Soon

KeyBank and Webster Bank have submitted tens of thousands of applications for billions of dollars of support for small businesses desperate to tap into newly available federal funds designed to discourage layoffs amidst the coronavirus public health and economic crises.

When those dollars will actually show up in business owners’ bank accounts? Well, that depends on how quickly federal government and private bank bureaucracies can churn through the applications.

Top regional bankers and financial advisers gave that update Tuesday morning during the latest Covid-19 webinar hosted by the Greater New Haven Chamber of Commerce.

Chamber President and CEO Garrett Sheehan interviewed and posed questions from the public to KeyBank Connecticut & Massachusetts Market President James Barger, Webster Bank Connecticut Market President Jeff Klaus, and Whittlesey Partner Brian Kerrigan about how local and regional business owners can access loans through the new federal Paycheck Protection Program (PPP).

That’s the roughly $350 billion pool of money reserved for small business support that was included in the latest $2.2 trillion coronavirus-related relief package passed by Congress and signed into law by the president late last month. 

The PPP, which officially launched last Friday, is being operated by the federal Small Business Administration in collaboration with federally insured private banks, like Webster and KeyBank.

“In the financial crisis of 2008 – 2009, banks were one of the problems,” said Barger (pictured). ​“In this crisis, banks aren’t a problem. We view ourselves as one of the solutions.”

“This is really unprecedented,” said Klaus, who is also the chair of New Haven’s chamber of commerce. ​“The banks are trying to do their best and trying to be a smooth, efficient conduit for what the Treasury Department is doing, which is really to throw as much water on a potential economic fire as they can.”

Here’s how PPP works: Small businesses, nonprofits, and independent contractors with fewer than 500 employees can apply through private banks for a loan worth up to eight weeks of a business’s operational costs, including payroll, employee benefits, utilities, mortgage interest, and rent.

Those loans are capped at $10 million each, and they will be entirely forgiven by the federal government if qualifying businesses retain their employees during the term of the loan and spend at least 75 percent of the loan amount on payroll.

According to Gov. Ned Lamont and state Department of Economic and Community Development (DECD) Commissioner David Lehman, whom Sheehan interviewed Monday morning in the Facebook Live video above, roughly 1,300 Connecticut businesses applied for loans totaling $650 million over this past weekend.

Larry Kudlow, the director of the National Economic Council, told CNBC Monday that the SBA had already made commitments for $38 billion worth of loans to 130,000 applicants in collaboration with 2,400 private lenders.

Tuesday morning, Barger and Klaus added their respective banks’ numbers to the conversation. Barger said that KeyBank has successfully submitted 23,000 PPP loan applications totaling $7 billion nationwide on behalf of the bank’s clients since the program launched on Friday. Klaus said that Webster Bank has submitted 5,000 applications totaling $3 billion in requested loans during that same time.

“This is truly about maintaining employment and trying to keep the economy alive during what really is a national shutdown,” said Klaus (pictured at right).

Critics have laid into the program for offering way too little money to meet the unprecedented nature of the current fiscal crisis, for relying too heavily on the notoriously creaky bureaucracy of the SBA, and for encouraging private banks to prioritize existing customers over smaller, un-banked businesses that may be most desperately in need of financial assistance by refusing to indemnify banks regarding the accuracy and eligibility of loans distributed.

“Every bank can establish its own priorities” in terms of which businesses it accepts PPP applications from, Klaus said. ​“With Webster, we are absolutely prioritizing clients first.” He said the bank has now started accepting inquiries from business owners having difficulty going through their own banks, which may or may be participating in the program. ​“Every bank really as its own protocol at this point.”

Barger said that KeyBank is also prioritizing existing customers, and that it is now requiring non-customers to first open a checking account with KeyBank before they are eligible to submit a PPP application with the bank.

“It’s gotten down to an operational issue now,” Barger said. ​“It’s all about: ​‘What can your systems hold up? How fast can we process these?’”

Klaus said that Webster Bank redeployed 100 employees from non-SBA functions to SBA functions over the weekend so as to handle the surge in PPP applications. He said the bank’s online application system can withstand 10 to 15 times more SBA applications than are handled during the bank’s normal, pre-pandemic volume. But that this crush of applications has nevertheless left banks scrambling to train staff to focus on PPP.

Barger added that businesses should not expect to receive funds immediately upon submitting an application. In fact, that is just the first step in a somewhat lengthy approval process.

He said that, when KeyBank receives an application, the bank submits it to the SBA. Then the SBA looks at the application and supporting documentation. Once the SBA is comfortable with the application, they submit back to the bank an approved loan number via the E‑Tran system. Then the bank documents and executes the loan, Barger said.

“Once the documents are executed and signed, once that is done, then the loan is funded. The timing of the funding really depends on that process.”

“Customers will not automatically get funds once the SBA gets the loan back,” he reiterated. The banks still have to go through their own documentation process before actually giving out the approved money.

When asked by Sheehan when businesses that have already applied for loans should expect to receive them, Klaus said that Webster submitted its first batch of applications to the SBA Tuesday morning. He said he expects funding to be made available to businesses later this week. ​“The answer is: Very, very shortly,” he said.

Later in the conversation, he reminded listeners of just how large and new this federal relief program is, and how private banks have not necessarily been made aware of what kinds of process requirements SBA is applying internally.

“I wish we had more clarity,” he said.

Sheehan and Kerrigan (pictured) urged businesses not to wait in applying for PPP funds, no matter how cumbersome the process may appear and no matter the uncertainty of what their business operations might look like for the foreseeable future.

That’s because Congress has only appropriated $350 billion for this program as of right now. And that money is sure to dry up soon.

“It’s possible the longer we go into this, there may be more stimulus funds,” Sheehan said. ​“This one could run out of money at some point.”

“I think the danger in [waiting to apply] is that I just don’t know whether the funds are going to be there,” said Kerrigan.