Minnesota Bankers Advise Patience as the Paycheck Protection Program Launches
April 2, 2020 - Congress recently passed the CARES Act, a $2.2 Trillion relief package designed to help individuals, families and small and large businesses affected by the COVID-19 pandemic. The Paycheck Protection Program (PPP) included in that law has been widely promoted as a way banks can partner with the government to get much needed relief to qualifying small businesses. Importantly, small businesses have been told to apply for these loans through their local banks starting tomorrow, April 3rd.
Minnesota banks stand ready to serve their customers and communities. While bankers understand that getting relief to small businesses as quickly as possible is crucial, they urge everyone to remain patient as we await this PPP regulatory guidance.
Unfortunately, the US Treasury and the Small Business Administration have not yet provided the banks with the rules and guidance they need to begin taking PPP loan applications and making these loans. They are attempting to write the guidance in a matter of days, which is an extremely difficult task.
Banks need clear guidance on the PPP loan application process, loan approval process and loan funding process. They also need to understand how the PPP’s loan forgiveness provisions and SBA guarantee rules will work. “Banks across the nation are literally waiting for instructions from the government on how to move forward,” MBA President and CEO Joe Witt said. “The Minnesota banks have a strong reputation of helping individuals and small businesses during challenging times, and they will be there during this difficult period. However, until the PPP rules are finalized, we cannot help small businesses through this particular loan program.”
MBA recommends the following five things businesses can do right now:
1. Talk to your lender, if you haven’t already. If you are experiencing or expect to experience cash flow problems, contacting your lender is the critical first step.
2. Plan for the next 3-6 months, if you haven’t already. Many businesses we’ve heard from have sufficient funds or access to capital for the first 2-3 months. However, we don’t know how long the pandemic will last, so look ahead, both in terms of a potential lengthening of the pandemic and also in how you will handle recovery and re-opening of the business if you are currently closed.
3. Be ready to produce required information quickly to help your lender with your application. All loan programs still require some information in order for the lender to underwrite the loan, including the ones created through the CARES Act. Be ready to produce required documentation quickly to help your lender with your application.
4. Don’t panic and draw on lines of credit unnecessarily. There is plenty of liquidity in the system (unlike the financial crisis in 2008) so don’t panic and draw on lines of credit unnecessarily. Just like we are encouraging consumers to keep excess cash in insured financial institutions, keep the lines of credit intact until you absolutely need to access them. There may be costs associated with accessing those funds and if you don’t need to incur the added expense, don’t.
5. Have patience. The banking industry wants to help you through these unprecedented times, but not all programs are in place yet, and even when they are, technology can cause hiccups or delays (e.g. systems crashing).
The Minnesota Bankers Association is the state’s largest trade association devoted exclusively to the representation of commercial banks. The MBA was founded in 1889 and represents 95% of Minnesota’s chartered banks. The MBA is proud to support our member banks as they work to ensure vital communities throughout the state. For more information, please visit our website at www.minnbankers.com.
Media Contact: Carla Bush, Director of Communications/Education, Minnesota Bankers Association, carlab@minnbankers.com; 952-857-2605