Best Practices for Working with Lenders on COVID-19 Loans
Barry Haugen, PresidentIndependent Community Banks of NDTuesday, April 28, 2020
Discussion Outline
• Paycheck Protection Program (PPP) version 1• PPP Version 2• PPP Version 3,4,…• Terms and Requirements• Loan Forgiveness & Best Practices• Communication with Your Lender and Advisors• Consumer Aspects• Q & A
Paycheck Protection Program Version 1
• $349 billion• April 3, 2020• Funds depleted April 15, 2020
Paycheck Protection Program OverviewStates With Comparable Population To ND
Amount of $$$ Per Capita Amount of $$ Per Capita Average Small Business
State Population # of Loans Loan Amount # Small Business Based on # Small Business Based on Population Loan Size
Wyoming 572,381 7,618 837,018,372$ 137,665 6,080$ 1,462$ 109,874$ Vermont 627,180 6,983 1,000,127,478$ 76,900 13,006$ 1,595$ 143,223$ Alaska 735,720 4,842 921,927,504$ 69,115 13,339$ 1,253$ 190,402$ North Dakota 760,900 11,002 1,548,384,035$ 72,723 21,292$ 2,035$ 140,737$ South Dakota 892,531 11,324 1,369,616,339$ 84,440 16,220$ 1,535$ 120,948$ Delaware 975,033 5,171 1,090,415,848$ 77,306 14,105$ 1,118$ 210,871$ Rhode Island 1,056,738 7,732 1,335,777,801$ 95,390 14,003$ 1,264$ 172,760$ Montana 1,074,532 13,456 1,470,300,136$ 118,315 12,427$ 1,368$ 109,267$ Maine 1,342,097 14,993 1,944,425,549$ 141,448 13,747$ 1,449$ 129,689$
Source: Bank of North Dakota
$-
$5,000
$10,000
$15,000
$20,000
$25,000
Wyoming Vermont Alaska North Dakota South Dakota Delaware Rhode Island Montana Maine
$6,080
$13,006 $13,339
$21,292
$16,220
$14,105 $14,003 $12,427
$13,747
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rsPPP Loan Dollars Per Capita Based on Number
of Small Businesses in States with Comparable Populations
Source: Bank of North Dakota
$-
$500
$1,000
$1,500
$2,000
$2,500
Wyoming Vermont Alaska North Dakota South Dakota Delaware Rhode Island Montana Maine
$1,462 $1,595
$1,253
$2,035
$1,535
$1,118 $1,264
$1,368 $1,449
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sand
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rsPPP Loan Dollars Per Capita Based on State Population
Source: Bank of North Dakota
$109,874
$143,223
$190,402
$140,737
$120,948
$210,871
$172,760
$109,267
$129,689
$-
$50,000
$100,000
$150,000
$200,000
$250,000
Wyoming Vermont Alaska North Dakota South Dakota Delaware Rhode Island Montana Maine
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sand
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rsAverage Small Business PPP Loan In States with Comparable Population
Source: Bank of North Dakota
PPP and EIDL Version 2 – Kicked Off Yesterday
• PPP Expanded by $310 Billion• $250 Billion• $30 Billion for Community Banks from $10-$50 Billion in Total Assets• $30 Billion for Community Banks less than $10 Billion in Total Assets
• EIDL Expanded by $60 Billion• $50 Billion for Loans• $10 Billion for Grants
PPP Version 3 and Beyond???...
• Forgivable Stimulus – Just PPP• $349 Billion Round 1 – April 3• $310 Billion Round 2 – April 27• $659 Billion Total Thus Far
• Don’t Expect Round 2 to Last Through This Week• Much Discussion About Another Iteration
Terms and Requirements
• Regardless the Version of Your Potential PPP• PPP Provides Small Businesses with Funds to Pay Up to 8 Weeks
of Payroll and Related Costs• At Least 75 Percent of Proceeds for Payroll Related
• Details of How to Calculate Maximum Loan Amounts by Business Type can be found at https://home.treasury.gov/system/files/136/How-to-Calculate-Loan-Amounts.pdf
• Just released this past weekend.
Terms and Requirements Cont’d
• Other Funds Can Be Used for Rents, Utilities, & Interest on Covered Mortgages (that existed at 2/15/2020)
• All Can Be Forgiven – But None Has to Be Forgiven• Unforgiven Amounts – 1.00 Percent APR with 2 Year Maturity
Next Step - PPP Loan Forgiveness
• Covered Period for Forgiveness Purposes is 8 Weeks Starting with Initial Disbursement of the PPP Loan
• For Going-Concern Businesses as of 2/15/2020• June 30, 2020 Sunset for Applications (not going to be an issue with PPP
Version 2)
• Forgiveness Requests Through Your Lender Can Begin after Week 7 Following Disbursement
• Specific Guidance Regarding Forgiveness Process Is Pending Regarding Process, Formula, Calculations, etc.
Until Then, PPP Loan Forgiveness Process Recommendations
• Ultimately:• Businesses Will Have to Attest/Certify to Requested Forgiveness• Lenders Must Conduct Their Due Diligence to Attest/Certify
Reasonableness• Actual Requests Can Be Made 7 Weeks After First Disbursement
• So, Begin Communications Immediately with Your Lender and Internal/External Support and Advisors
PPP Loan Forgiveness Process Recommendations
• Immediately Following Disbursement:• Track Loan Proceeds and Eligible Expenses• Maybe Separate Accounts; Certainly Tracking Spreadsheets, etc.• Estimate Eligible Payroll Expenses and Evaluate Requirements During
Forgiveness Period• Also Estimate Rent, Lease, Utilities, Interest Expenses During Forgiveness
Period (Again….8 Weeks from Initial Disbursement)
PPP Loan Forgiveness Process Recommendations
• Within 30 Days of Disbursement:• Understand That if There Has Been A Decrease from the Comparable
Period, Those Decreases Need to Be Eliminated by June 30.• Monitor Employee Pay so No Reductions Are More than 25 Percent• Focus on Supporting Documentation:
• Payroll Reports• Invoices• Receipts• Any Other Evidence that Substantiates Eligible Expenses Were Paid
PPP Loan Forgiveness Process Recommendations
• By the End of the 8 Week Period• Maintain Communications with Lender and Advisors Regarding
Forgiveness Guidance• Gather All Supporting Documentation Relative to Payroll-Related Costs
and Other Qualified Expenses• Complete Application for Loan Forgiveness (Don’t Know What That Looks
Like Yet) in Concert with Lender and Advisors• Remember the Goal: Provide Solid Documentation and Evidence for
Forgiveness of All Qualified Expenses Per the CARES Act.
Other Communications with Lenders
• These Are Unprecedented Times• How Could Cash Flow and Business Operations Not Be Affected• Banks Fully Expect and Are Dealing with Their Customers’
Hardships – Relationship Banking!• Bank Regulators Also Recognize the Need for Flexibility, and Have
Relaxed Regulations/Requirements/Etc. Relative to Lenders Working with Small Business Borrowers
Other Communications with Lenders
• Loan Modifications Are the Norm• Restructuring Terms• Restructuring Amortization Schedules• Short Term Interest Only
• Stay In Close Communication with Your Lender
Consumer Aspects
• We Are All Consumers• Employees, Co-workers, Family
• Many Options Available for Consumers to Get Through• Student Loans Forbearance
• Bank of North Dakota• Home Mortgage Forbearance
• Federally Backed or Owned• 6 Months + 6 Months, If Necessary
• Other Consumer Loan Potential Hardships• Credit Card – Skip-A-Payment Options May Be Available• For Any Portfolio Loans Held by Your Local Institution – PLEASE Contact Them.
Questions?
Barry Haugen, PresidentIndependent Community Banks of NDTuesday, April 28, 2020