This year’s NAGGL switched from in-person to virtual, which didn’t make much difference to us, the 600 or so attendees. NAGGL’s Spring Conference was the busiest and newsiest I’ve attended in a long time. Virtually or otherwise. We gathered in cyberspace to get an inside track on the economy, happenings on the Hill, and what SBA has in store for7(a), 504, PPP — and more. Some highlights:
Economy on the uptick. The low down on the uptick: As we know, retailers, fitness centers, entertainment venues, and the travel industry suffered the most. Help came with the CARES Act, PPP extensions, disaster loans, grants and other assistance. Already, restaurants are up to 60% -65% of pre-pandemic levels. For many other businesses 2020 wasn’t such a bad year. They’re doing very nicely, thank you. Construction might be at an all-time high and manufacturing is booming, yet working capital remains a big concern due to supply chain issues. It’s a good practice to scrutinize construction budgets closely with this in mind. You can provide your clients with such recommendations as streamlining inventory processes, revisiting vendors and suppliers and researching new markets.
Opportunities? There can be no real upside to the devastating pandemic and its ramifications. Yet PPP introduced you to many small businesses, with most not knowing what SBA is all about. Commercial real estate is on the rise, with many companies doing more with less, opening up chunks of office space for small businesses. And opportunities for you. Internally. if you’re like many lenders, you weren’t prepared with resources or technology for the glut of PPP applicants. Now’s the time to reinvest in your online presence and on new technologies.
Happenings in D.C. With a new president and a new congress will come new policies. Extensions of stimulus provisions weren’t included in the 2022 budget. Instead, the administration is leaning toward grant programs, e.g., the Shuttered Venue program and the Restaurant Revitalization Fund. In brief, issues on the Hill include underserved markets, PPP oversight, fraud detection, grant programs, 7(a) program costs, agent oversight, the Community Advantage program and the secondary market.
SBA: Life after PPP. Yes, lenders, there will be life after PPP, as funds run out this year, sometime between April 30 and May 10 (a tad sooner than the May 31st application sunset date*) and SBA moves from rescue to recovery and potential new programs. With resources moving from PPP, especially with no fees on 7(a) loans until the end of SBA’s fiscal year, 9/30/2021, there’s a big uptick in 7(a) loans; 504 loans aren’t far behind. Express loans are down, but SBA anticipates a turnaround. Franchise activity is up.
What’s next? Guidance, guidance, guidance. You’ll see more of it regarding servicing and liquidation for not forgiven and/or defaulted PPP loans, ideally by the end of April and the first of May. SBA will look at industries that have been challenged and how to work with them. And at how and what can be done with loan modifications. PPP Servicing and liquidation will be simplified with changes including 100% guaranty, new hold harmless language, and 1% interest for five (5) years. There also will be an expedited forgiveness process. If anything, forgiveness needs to be stepped up. SBA wants to be done with it by Labor Day Some good news: Expect a generous grant program coming out soon.
What’s a lender need to do?
- Make forgiveness a priority As noted, SBA aims to wrap up PPP by Labor Day.
- Expect a steady volume of small loans. Make funds readily available to companies affected the most.
- Looking ahead to recovery, you MUST provide PPP borrowers with STAMPED PAID on the note pad when a forgiven loan is paid off. An electronic statement showing a zero balance isn’t sufficient.
- Please note: The Ten Tab Process doesn’t have a place for the PPP. Process. Guidance will be coming soon!
- Get back to traditional 7(a) and 504 funding
- As appropriate, recommend that restaurant clients apply for the Restaurant Revitalization grant program. (Guidance released 4/19/2021)
SBA streamlining, modernizing. Big change: SBA’s move away from Colson to a new Transfer Agent, with guidance expected in late summer or early fall. Completing the 159 Form in CAFS is part of stage one of a larger transition, geared toward integrating data into an existing SBA platform (CAFS system). The goal: one place for all data. Other revisions include multiple updates to the Lender Portal with the new PARRIS Score card on the Portal
I’ll be revisiting these issues in more depth as time goes on and programs evolve. And as always, we’re here to assist you. Contact JRB
*Any extension of funds must be approved before May 31st.