Arkansas bankers who fronted money to thousands of businesses in the federal Paycheck Protection Program are beginning to get that money back, albeit slowly, as the Small Business Administration begins to forgive PPP loans.
Companies and nonprofits in Arkansas received a combined $3.3 billion in PPP loans, which were designed to soften job losses from the pandemic.
Bankers here are also hoping that, for their sake and customers’, the forgiveness process will be simplified and expedited for loans of up to $150,000 when Congress reconvenes.
That has already happened for loans of $50,000 or less. There were 31,928 of those loans awarded in Arkansas, totaling $522 million, Arkansas SBA Director Edward Haddock said by email. “We continue to favor additional legislation to further simplify the forgiveness process.”
“Right now, we don’t have data on how many applications have been submitted or the dollar amount of loans forgiven,” Haddock said. “However, SBA is tracking this data and will make it available as soon as possible.”
The SBA began approving PPP forgiveness applications and remitting forgiveness payments on Oct. 2. Borrowers have 10 months from when they received PPP funds to apply for forgiveness. If their loans aren’t forgiven, they’ll have to pay their bank back at a 1% interest rate.
The PPP loan application closed on Aug. 8, so June 8, 2021, “would be the latest expected timeframe for those final applicants to apply for forgiveness,” Haddock said.
Borrowers must submit their forgiveness applications to their lenders. Lenders have 60 days to submit an application to the SBA, which has 90 days to act on it.
For a loan to be forgiven, the borrowers must prove they used the funds for certain qualifying expenses, such as to rehire workers.
“With a large program like this, there’s always going to be a little bit of starts and stops. We’d all like it to just be black and white and smooth. But it was a big, big deal for the country,” said Chris Thornton, executive vice president and loan manager at Arvest Bank, which is headquartered in Fayetteville. “I think it’s gone pretty well … for a program of this magnitude and size to roll out.”
Kevin Hester, executive vice president and chief lending officer at Centennial Bank of Conway, said, “We all did an admirable job of getting all of this done in a very short period of time where we got these funds in our customers’ hands.
“There are a lot of assumptions that had to be made at different points in this process. And there were times where we just had to make decisions and [say] this is the direction we’re going to go,” he said. “There’s no guidance really on it, and we’re going to take this as the best path and we’re going to move forward. Whatever happens, happens.”
Haddock said lenders and borrowers should “keep the bigger picture in perspective.” The SBA, in coordination with the Treasury Department, built and launched the $525 billion PPP in just six days, he said.
Mark Wilson, director of small business lending at Simmons Bank of Pine Bluff, said, “I think there’s been so much information that has come out over the last six months. It can be really overwhelming for a small-business owner to keep up with everything. I think, whether it’s us or the SBA, we have to be the best at communicating and helping and being a good banking partner.”
“With a large program like this, there’s always going to be a little bit of starts and stops. We’d all like it to just be black and white and smooth. But it was a big, big deal for the country. I think it’s gone pretty well … for a program of this magnitude and size to roll out.”
– CHRIS THORNTON
Executive VP and loan manager, Arvest Bank
Trickling In
Of the four bankers Arkansas Business interviewed, Randy Scott, president and CEO of Farmers Bank & Trust in Blytheville, and Thornton with Arvest had the most good news to share.
Arvest funded 15,312 PPP loans totaling about $1.16 billion for customers across its four-state footprint. As of last week, Thornton said, more than 2,400 forgiveness applications had been submitted to the bank by its customers and the bank had submitted 1,725 of those to the SBA. More than 300 of Arvest’s loans have been forgiven, he said. That represents about 2.5% of its loan balance.
Farmers Bank funded about $25 million in PPP loans, and it had gotten $2 million of that back as of Oct. 28, Scott said. As of that date, the bank had submitted forgiveness applications to the SBA for approximately 78% of its PPP loans. About 35% of those loans had been forgiven, he said, and the forgiven loans were all $100,000 or less.
But this isn’t the case for most banks, said Scott, who is also vice chairman of the Arkansas Bankers Association. Farmers was particularly “aggressive” in submitting forgiveness applications, he said.
“It’s started but a lot of banks have not received much at all. From my constituents around that I’ve talked with, most of those have only received one or two loans’ forgiveness so far,” Scott said. “So it’s starting to trickle in. We’ve got some big-dollar ones out there that we haven’t heard anything on.”
He said the SBA’s 90-day deadline on some of the forgiveness applications Farmers Bank submitted would be around Nov. 10, so “it’ll be interesting to see if they’re able to meet that deadline.”
In early October, Scott was one of a few bankers who told Arkansas Business he was concerned about not being able to get PPP loans off his bank’s books by the end of the year because the SBA seemed to be dragging its feet. He’s more optimistic now and believes that goal is “conceivable.”
Thornton said he expects most of the PPP loans to be off Arvest’s books by the first quarter of 2021.
All four bankers said the timing of reimbursement for the PPP loans wouldn’t significantly impact their banks’ bottom lines, and that the process is going about how they expected.
“We do hear that there could be potentially $150,000, maybe even up to a higher dollar mark, there could be different tiers of a more lenient forgiveness process.”
– MARK WILSON
Director of small business lending, Simmons Bank
$150K Hopes
Centennial Bank of Conway had seen two or three loans forgiven as of last week, Hester said.
Centennial funded about 8,500 loans totaling $850 million and had submitted forgiveness applications for about 10% of its PPP loan balance to the SBA as of last week.
Hester said the bank is focusing on larger loans for now because the forgiveness process could be expedited and simplified for the smaller loans later on.
He said the bank would, in mid-November, start looking at getting the smaller loans forgiven. Those that are $150,000 or less represent 75%-85% of the loans Centennial funded, Hester said.
Unlike the other three banks, and as of early last week, Simmons hadn’t heard back on any of the 10 or 11 forgiveness applications it had submitted to the SBA, Wilson said.
Simmons funded 8,200 PPP loans totaling approximately $1 billion. The bank set up an online portal to accept forgiveness applications from its PPP customers a few weeks ago, he said, and it had received about 20 applications as of early last week.
Wilson speculated that some of Simmons’ customers had put this off until after the election or had decided to wait on Congress to take further action on the smaller loans.
“We do hear that there could be potentially $150,000, maybe even up to a higher dollar mark, there could be different tiers of a more lenient forgiveness process,” he said.
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