Banks are better positioned to handle federal Paycheck Protection Program (PPP) loan forgiveness applications as Second Draw PPP loan forgiveness deadlines approach.

The Second Draw PPP loans were available to small businesses that previously received First Draw PPP loans, had no more than 300 employees and could prove at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020, according to the U.S. Small Business Administration (SBA). The PPP was originally designed to provide a direct incentive for small businesses to keep their employees on payroll amid the COVID-19 pandemic between April 2020 and May 31, 2021.

Now, as small businesses face deadlines to apply for forgiveness on Second Draw PPP loans, “lenders will likely see an increase in volume as the outstanding loans begin to roll off of deferment and into payment mode,” an SBA spokesperson told Bank Automation News.

Minnesota-based Sunrise Banks, for one, has just 5% to 7% of loan forgiveness applications left to process, Chris Albrecht, senior vice president and director of Small Business Administration lending at Sunrise Banks, told BAN.

The $2 billion bank processed 3,700 PPP loans and has just under 200 forgiveness applications left to process, Albrecht said. The bank is able to process high volumes of forgiveness applications due to its partnership with document automation platform Anvil, she noted.

The platform offers borrowers access to a loan portal where they can view their original loan, monitor their forgiveness deadline and access the forgiveness application, Albrecht told BAN. The automated system stores borrower data and has all information necessary to complete a forgiveness application. The only thing a borrower may need to do is submit a verification form, she added.

Since the original launch of the automated PPP loan origination and forgiveness process, Anvil has maintained the platform in order to adhere to any SBA rules changes, guideline updates or necessary forms additions, Albrecht said. “We have been in constant contact [with Anvil] to make sure that the platform is most up to date.”

Automation preparation

Amid the second wave of loan forgiveness applications, banks — and their employees — have had a much better understanding of how the automated technology works on their platforms compared with the first round, Albrecht said.

“Small businesses and financial institutions have had much longer to prepare a platform with the ability to automate on their end,” the SBA spokesperson told BAN.

Sunrise Banks described the first round of PPP loans as a “learning curve,” Albrecht said, noting they were “understanding how the process worked … [and] the second round was a lot smoother.” Along with a better grasp on the technology, the bank also allocated one full-time employee and a team of IT specialists to assist borrowers in the loan forgiveness process, she added.

The bank was able to predict borrower questions, offer additional support from trained employees and better navigate the lender portal, Albrecht said. Dedicating staff specifically to the PPP loan business “allows us to monitor very closely where we are at any point in time for application and also to provide personal outreach as necessary to ensure borrowers understand the forgiveness process.”

SBA direct forgiveness

For small-dollar loans, the SBA also implemented direct forgiveness solutions, available through more than 1,400 banks including New Jersey FCU, Commonwealth Cooperative Bank and First Federal Bank.

The direct forgiveness solution is available on loans of $150,000 or less through the SBA forgiveness portal, according to the SBA. Loans of greater value, or those originated outside of one of the 1,400 financial institutions that participated in direct forgiveness, must be completed at the financial institution where the loan originated.

“Some very active PPP lenders developed systems to work through origination and forgiveness,” the SBA spokesperson said, noting “A significant number of lenders are using the SBA direct forgiveness solution for small loans. Additionally, the Office of Capital Access has provided lending software providers with technical standards to incorporate forgiveness requirements into their existing platforms.

Editor’s Note: This story has been updated to reflect that the correct asset size for Sunrise Banks is $2 billion.

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