PPP SMALL BUSINESS LOANS: How $659 billion in coronavirus-linked loans are being spread across lenders, states, and industries

PPP SMALL BUSINESS LOANS: How $659 billion in coronavirus-linked loans are being spread across lenders, states, and industries

August 20, 2020
  • This is a preview of the Insider Intelligence PPP Small Business Loans research report, which is an update to our May version of this report. Purchase both reports here for the price of one.
  • Another update to this report will provide final numbers after the second tranche's current planned expiry on August 8, and will be available for free to those who have purchased any of the two preceding versions of this report.
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In April, the US government launched the historic Paycheck Protection Program (PPP) to provide financial assistance to small businesses struggling amid the pandemic.

The PPP has so far allocated a staggering $659 billion across two separate installments. Funds for the $349 billion first round were tapped out in less than two weeks, while uptake slowed during the second round — $132 billion is still undrawn — as complex requirements and murky loan forgiveness guidelines are deterring small businesses from applying.

The PPP represents an extraordinary step to solve an unprecedented challenge faced by small businesses, and banks that act decisively in deploying PPP loans stand to earn new clients and goodwill from regulators, as well as a slice of billions in loan fees.

But earning these rewards is no simple task: Banks are expected to process and approve a flurry of loans on a rapid timeline, while processing applications on a first-come, first-served basis. On top of that, banks must now dedicate significant resources to processing loan forgiveness applications, a task that might be even more strenuous than approving loans.

Further, banks have taken heat for their handling of the PPP, while dissatisfaction among small businesses could also cost them customers. Regulators, lawyers, and the media alike have charged banks with being too slow to accept applications, prioritizing existing clients, and favoring larger loan amounts — although public criticism has eased during the program's second installment. On top of that, small businesses' dissatisfaction with how banks are handling the program could lead to bank switches: 29% of small business owners say their opinion of their bank has worsened after seeking a PPP loan, per a survey conducted by Greenwich Associates cited by American Banker. 

In PPP Small Business Loans — the second of three updates — Insider Intelligence looks at how different lenders fared at implementing the PPP by examining the available data on PPP lenders' approval patterns and providing insights into how loans were spread across top lenders, geographies, and industries up to June 30. Further, our next installment will provide final numbers after the second tranche's current planned expiry on August 8, and will be available for free to those who have purchased any preceding versions of this report.

The companies mentioned in the report include: Bank of America, BMO Harris, Citibank, Cross River Bank, Funding Circle,  JPMorgan Chase, KeyBank, Lendio, M&T Bank, PayPal, PNC, Truist Bank, U.S. Bank, and Wells Fargo.

 

Here are a few key takeaways from the report:

  • Though the PPFA was enacted to alleviate concerns around the program and revitalize demand, the continuous revision of guidelines likely had the opposite effect in making it harder for businesses to understand requirements. Still, banks made significant headway toward approving smaller loans in the program's second round.
  • Chase and BofA came out on top with total approved sums. As of June 30, Chase had approved more than double the $14.1 billion it lent during the program's first installment, while BofA lent nearly six times as much, in line with our expectation that some key players that lagged in round one of the PPP would catch up in round two. 
  • BMO Harris, KeyBank, and M&T Bank had the highest average loan sizes among top lenders, while Cross River and Wells Fargo had the lowest. BMO Harris' did a better job than KeyBank and M&T in reducing its average loan size compared with the PPP's first installment. 
  • New Jersey-based Cross River was by far the smallest bank among top lenders, managing to lend an astounding 215% of its total assets. The community bank's impressive performance was supported by its partnerships with fintechs such as Kabbage and QuickBooks.
  • The PPP was more successful in getting funds to hard-hit states during the second installment, partly as banks active in those areas picked up their loan approval pace, though some disparities are still evident.
  • Funds had a mixed track record of reaching the hardest-hit industry sectors. In some industries, high need for funds was matched with higher supply, such as healthcare. But some of the hardest-hit industries, like accommodation and food, didn't get the level of relief they needed.

In full, the report:

  • Combines official Small Business Administration (SBA) data with additional sources, such as company filings and earnings calls, an academic paper, and analyst research, to generate insights into how different lenders fared at implementing the PPP up to June 30. 
  • Looks into PPP loan sizes and total fees gained by lenders, and examines total funded loans and average loan amounts for the top PPP lenders.
  • Provides key takeaways from the analysis of approved loan figures by industry and geography.

Interested in getting the full report? Here's how you can gain access:

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