During the first loan processing cycle of the Small Business Paycheck Protection Program, Huntingdon Valley Bank was struggling.
“We threw bodies at the problem,” said Hugh Connelly, executive vice president and director of loans for the business banking division of community bank in Doylestown, Pa. “We have increased the number of employees by using [the Small Business Administration’s] E-Tran. We worked incredibly hard, but not necessarily smart or efficiently.
Before the start of the second round of PPP funding, the company with five branches and $ 356 million in assets built a portal with cloud technology company nCino to process requests faster, allowing employees to time hours a lot. more reasonable every day while generating much higher volumes, including a peak of $ 25 million in one day.
Huntingdon ended up processing just under $ 80 million in loans spread across nearly 500 applications.
Since PPP allows companies to write off debt if they meet certain criteria, Connelly’s team is preparing to have these loans canceled.
“We did the hard work, we did the work smart. Now we have to work hard and smart at the same time, ”Connelly said. “At the end of the day, the whole game is about forgiveness.”
This meant looking for a platform that could simplify the process for lenders and borrowers. After comparing several options, he landed on software company Vikar Technologies, which provides workflow automation.
Vikar is one of the many providers who help banks automate loan cancellation requests. Others include software and consulting firm Global Wave, trade finance firm LQD Business Finance, digital lending and selling platform Numerated, customer conversation management platform Smart Communications, and supplier Wolters Kluwer Information Services.
There are far fewer providers focusing on forgiveness skills than those who built platforms and portals that enabled banks to process loan applications under the coronavirus relief bill during the first two phases of PPP financing. A number of banks outsource the forgiveness process, or sell their loans to non-banks.
But while small business owners are ultimately responsible for putting their pardon requests in order, banks have an interest in ironing out the experience. Helping clients get all their loans canceled could strengthen relationships for years to come, especially for community banks, which have become a lifeline for small business owners who hit a wall when they seek funds from large institutions.
“A lot of borrowers took out PPP loans in a state of turmoil because they wanted to make sure they could do the payroll,” said David O’Connell, senior analyst for the wholesale banking group at Aite. Group. “They were thinking more about closing the loan than how they would have canceled it.”
But “if my bank made it easier for me [i.e. a small business owner] to not only complete the forgiveness process, but maximize the loan amount forgiven, I will feel seriously loyal to this bank, ”said O’Connell. “He is a relationship booster and a loyalty summoner.”
Borrowers are eligible for 100% cancellation of their loans if they meet a set of requirements, such as using at least 60% of the amount for payroll and not reducing wages beyond a specified amount. . Banks wait for the SBA to finalize the requirements before submitting rebate requests, although some are already sending borrowers a link to these portals.
“Small businesses are likely discussing the use of the loan proceeds with their financial controllers to understand when the right time will be to apologize under the terms of the program,” said Samir Agarwal, who oversees Wolters Kluwer’s TSoftPlus program for processing of SBA loans. “This decision depends on how and when they use the funds.” One institution that has announced plans to use TSoftPlus software for the loan cancellation stage is Glasford State Bank in Glasford, Illinois.
When the time comes, the volume, variety, and analog nature of the documents (such as utility bills and pay stubs) needed to verify that businesses have spent their funds appropriately will complicate the application process, said O’Connell.
“I can imagine a small business faxing their most recent bank statements to a banker and saying, ‘You get it all,’ O’Connell said.
This is where fintechs come in.
Typically, these automated remittance tools will provide banks with an online portal that guides borrowers through each stage of the application, much like a questionnaire; pre-fill the form if possible with existing information on the borrower; perform all calculations; and invite borrowers to upload the correct documents. Lenders will receive a completed application, which they can review and submit to the SBA.
“By the time this goes to the lender, you are relatively confident that the borrower has completed it correctly and included the correct documentation,” said Glenn Bolstad, CEO of Vikar Technologies.
Numerated, which provides an automated remittance solution, described some of the complexities of manually filling out the PPP Loan Remission Request, or Form 3508, in a blog post. (FIS sells a similar platform based on Numerated’s technology.) For example, borrowers need answers to questions at the end of the form in order to answer questions at the start. Some questions are not always required based on previous answers.
Pinnacle Financial Partners in Nashville, Tennessee, and Hancock Whitney in Gulfport, Mississippi, are among more than 70 institutions that will use Numerated’s forgiveness software.
Smart Communications’ forgiveness solution uses the SmartIQ platform, a cloud-based tool. “When creating a new smart form or creating a workflow, the process is simple drag and drop,” said Neal Keene, director of field technology at Smart Communications. “There is no need for computers or code to build dynamic questioning. “
Smart Communications customers include credit unions, regional banks, and small banks, and the company says it is adding new institutions every week.
Connelly, from Huntingdon Valley Bank, chose Vikar because the platform was customizable, affordable, and didn’t require a systems integrator. His team added their own tutorials and pop-ups for answering questions, checking warnings for math errors, and more.
Vikar is currently partnering with Innovative Financing Solutions (IFS), a lender and business advisory firm, to train around 20 regional and community banks on Vikar’s software.
“We had all the basics out of the box, but we reconfigured our software to have some of the PPP-specific business rules,” Bolstad said. “For example, did you use 60% for qualifying expenses like payroll during the period covered? “
LQD Business Finance is another vendor who built their solution on an existing platform in a matter of weeks.
“We simply used the existing native technology stack, which included API integration and data integration automation, to build the forgiveness app,” said George Souri, Founder and CEO of LQD. .
Many of these platforms operate in a similar fashion, but have looked for ways to differentiate themselves.
LQD offers audit protection, which means the company will pay the difference in the event that a future audit reveals that it has underestimated the amount of the rebate. Vikar has partnered with IFS to provide consulting services and serve as technical support.
Costs also vary. Smart Communications, for example, offers its solution free of charge to existing SmartIQ customers. Wolters Kluwer charges a fixed transaction cost for its TSoftPlus PPP forgiveness module.
In Huntingdon, Connelly awaits the deployment of the SBA Forgiveness Portal, which is expected to occur around July 30. Once he’s ready, he and his team will aim to approve each request in less than a week with the help of Vikar’s platform.
“We try to manage our day-to-day operations, meeting the borrowing and deposit needs of our customers,” said Connelly. “I cannot meet these needs if my whole team is trapped in the bunker asking for forgiveness.”