August 10, 2020
With news of massive restaurant chains, NBA franchises and billionaires’ clothing lines benefiting from disbursements of Paycheck Protection Program loans — one wouldn’t have been faulted for asking how the program could be any sort of panacea for an ailing Main Street economy.
But, with a final deadline to apply for the program lapsing on Aug. 8, local bank executive Joe Lebel is looking at a mostly complete picture of who benefited, at least from his bank’s involvement with the Small Business Association loans. There’s no knowing exactly what level of forgiveness holders of those loans will be able to get until SBA officially opens the floodgates for that part of the process on Aug. 8, but the executive vice president and chief operating officer of Toms River-based OceanFirst Bank has some early insight into that, too.
And in the final analysis … he does think PPP loans have had a hand in stabilizing local business.
“They can do nothing other than help,” he answers, adding that, at least for some local small businesses, “it has definitely meant the difference between surviving and not surviving.”
More than half of the bank’s about 3,000 PPP loans, which totaled $503.8 million, went to businesses with less than 10 employees. Only 76 loans went to businesses with more than 100 employees.
The SBA itself — after accusations that only the country’s top-tier businesses were seeing an outsized benefit from the program, which allowed for megaloans of $5 million or $10 million — reported that the average loan size nationally was about $100,000.
More than 125,000 small business loans, adding up to around $4.5 billion, were made in New Jersey, according to the SBA. That reportedly saved 530,000-some jobs.
OceanFirst’s Lebel wouldn’t say, however, that the PPP was all New Jersey needs to get its economy back on track after the disruption of COVID-19’s spread.
“It’s only one part of the puzzle,” he said. “We have to get the economy back up to a point of consumer confidence and get more people back to work. And, in certain industries, that’s going to take longer.”
From where he sits, Lebel already has a view of a rebound in the industries that have been less adversely affected — so, not restaurants and the hospitality sector, in other words.
But Lebel said OceanFirst decided during the worst of the pandemic’s local impact to defer certain loan payments for 60 to 90 days for the most seriously impacted categories of business borrowers. Even for those businesses, a majority intend to resume repayments soon — perhaps signaling that less of these businesses would be filing for bankruptcy protection or have trouble returning to usual revenues than anticipated.
“Some folks have rebounded quickly,” he said. “Businesses have put in place plans to be successful during the pandemic … and, along with the states doing a good job being proactive and the federal resources that are available, I’m hopeful more local businesses will be able to generate the revenues needed to get them through this.”
After three decades in the local banking sector, and being a Jerseyan his whole life, Lebel said he’s confident in the resiliency of New Jersey’s residents and businesses.
“They’re going to work hard to get back to where they were,” he said. “I still think about (Superstorm) Sandy — which I realize is not the same, but you did have businesses that were closed for a long period of time and people worried about their ability to return and be successful. Yet, within a year or so, they were able to do that.”
Digitizing loan paperwork
If anything were being done in person anymore, the paper documents that businesses have to collect for the Paycheck Protection Program’s loan forgiveness application would stack high:
Copies of payroll checks, bank statements, rent and utility bills and much more.
Everything involved in this part of the process is looking to be a towering task for banks.
But, then, there’s Old Bridge-based Vikar Technologies — one of the vendors that, along with consulting firms and big banks themselves, is automating loan forgiveness applications to make that process less daunting.
CEO Glenn Bolstad said his startup went through the Newark Venture Partners incubator program after being founded with the goal of reducing the amount of paper-based, archaic systems in the financial services industry.
For Vikar, which offers loan life-cycle management as one of its main solutions, the most complicated aspect of the PPP process became an unexpected opportunity to prove the value of the startup’s platform.
“When the actual forgiveness portion of this came along, we said, ‘Wait, this is going to be hard for banks to do,'” Bolstad said. “I’m not trying to minimize the actual PPP application, but the forgiveness process is much more onerous and time-consuming than that beginning application process.”
The company connected with some local community banks through the trade association NJ Bankers. Starting in late June, Bolstad was anticipating the company would be helping process upwards of 10,000 loans when the SBA opened the floodgates for giving loans in August.
“All the banks we spoke to voiced a strong need for automation in this part of the PPP process,” he said. “After this process has reached its terminus, we’re hoping that the relationships we’ve formed with them will lead to more involvement in the future.”
In late July, the startup reported that it was selected by Valley National Bank to automate its commercial loan onboarding process.
With each of these partnerships, Bolstad added, it’s becoming clear that the trend of fintech firms partnering with banks is in full swing.
“I don’t think any bank can overlook technology anymore,” he said. “For those that were sitting on the fence, the pandemic really illustrated that the time is now to have the right technology in place.”