How will local banks take on PPP round 2? A local CEO weighs in.
By Ashley Portero – Reporter, South Florida Business Journal
Apr 27, 2020, 5:33pm EDT
Apollo Bank was ready to submit Paycheck Protection Program applications to the U.S. Small Business Administration at 10:30 a.m., Monday, when the agency began accepting a second round of applications for the small business loan program.
By 10:31 a.m., the Miami-based bank was met with messages saying the SBA’s E-Tran system – the portal through which it accepts applications – was at overcapacity.
While that wasn’t unexpected, CEO Eddy Arriola said it’s a signal that thousands of lenders are simultaneously trying to move applications through the system before funding is, once again, exhausted.
“I’m assuming we have maybe 72 hours to get SBA approvals,” he said. “Our team will be in their pajamas tonight inputting applications for as long as they’re accepted.”
Arriola said Apollo, a community bank with $745 million in assets, funded 100 loans totaling about $20 million before the PPP hit its $349 billion limit on April 16.
Funding for the first round, implemented April 7, was drained after barely two weeks. Bankers expect the second, $310 billion round could be depleted in less than a week, Arriola said.
Apollo has received hundreds of PPP applications from businesses across a variety of sectors, including construction, hospitality, law and medical companies. While the bank is better-prepared to quickly review and process PPP applications after the program’s rocky first round, Arriola said many businesses still fear their application won’t be approved on time.
Even though his bank is better prepared for round two, Arriola said lenders still essentially must “compete against each other” for SBA approval before funds run dry. That part, he said, isn’t any easier because it’s out of the bank’s control.
"[The bank] is a facilitator," he said. "If E-Tran hits capacity, there's nothing we can do, and that's tough in a first-come, first-serve process."
The first round of PPP funding made headlines after it was revealed large companies such as Shake Shack and AutoNation received millions in loans under the program. If the second round is primarily awarded to businesses seeking smaller loans, the $310 billion pot could stretch farther, Arriola said.
The average size of the loan funded by Apollo Bank in in the first round was $250,000, he added.
Arriola said he has been pleased with the role community bank's have played in processing PPP applications for small businesses. He said he was concerned the reliance on big financial institutions for relief assistance would be a death knell for small banks.
When the PPP first launched, some of Apollo Bank's business customers had initially planned on applying through national banks like Bank of America, which was among the first to launch an online application portal for the program.
"A few weeks later, and it's the complete opposite," he said, noting how community banks have played a sizable role in funding loans for small businesses. "Now small to mid-size businesses are seeing the importance of being able to get their local banker on the phone, so I think there's an opportunity to keep that story going."