Bankers Recall ‘Chaotic’ Rollout of PPP Lending

“It was chaotic to say the least.”That was how Tamara Gurney, chief executive of Mission Valley Bank, summarized the process of giving out Payroll Protection Program loans to small businesses.

Through the PPP, more than $521 billion in “forgivable loans” has been distributed to more than 5.1 million small and mid-sized companies from one end of the country to the other.

At the Sun Valley financial institution that Gurney runs, the amount distributed was $75 million to 350 owners of small and medium-sized businesses in the greater San Fernando Valley region.

Gurney said that the biggest challenge faced by the team at Mission Valley, which is No. 21 on the Business Journal’s list of Banks ranked by Valley-area market share, was the constant changes to the program. They seemed to come at least every 48 hours if not daily, she said.

“For example, the Thursday night before the kickoff in early April, late in the evening they changed the rules,” Gurney added. “And then again on Monday morning they were changed again.”Even bigger banks faced challenges. At Bank of America, No. 3 on the Business Journal’s list, Colleen Haggerty, a spokeswoman, said that the institution grappled with new rules on the interaction of employees and customers.

“As essential workers, challenges have been around doing all we can to prioritize the health and safety of our clients and employees, which have resulted in some financial centers temporarily closing,” Haggerty said in an email to the Business Journal.In Greater Los Angeles, the bank has helped more than 32,000 small businesses access more than $2.15 billion in PPP funding, with 80 percent going to local companies with fewer than 10 employees, she said.

Todd Hollander, head of business and small business banking at Union Bank, said the institution lent about $2.4 billion to 14,000 businesses in California, Oregon and Washington State. About 20 percent of the businesses were in Los Angeles County, he added.

Union Bank, owned by MUFG Union Bank, is No. 6 on the Business Journal’s list.Guidelines put out by the Small Business Administration on who could get PPP loans stipulated a first come, first served basis, Hollander said, adding that the bank adhered to that very strictly.“We didn’t care what the size of the company was or the status of the company when we took them on,” he said.

That strict adherence is why a majority of Union Bank’s PPP loans were in the amount of $100,000 or less, and 55 percent were to companies with $1 million or less in annual revenue.

Expected defaultsNow, six months after the program’s rollout, Mission Valley’s Gurney is starting to see some defaults and delinquencies on loans.

“We are expecting to see, and the banking industry is expecting to see, some credit quality deterioration before the end of the year,” she said.Some businesses were able to pay back the PPP in full. That goes for restaurants that were able to pivot and compete on takeout and delivery orders.But then there was another restaurant in the Valley that had to close its two locations over the summer after having been in business for 45 years, Gurney added.

“If the ownership has the financial capacity to hang on and wants to, it can be worked out,” she said. “That’s not always the case, unfortunately.” Looking ahead, all of the bankers and their representatives were in agreement that technology will be the biggest permanent change for the post-pandemic industry.“For example, we have seen double-digit growth in mobile adoption every week since work-from-home mandates began, and triple-digit growth for things like electronic signatures and document exchange capabilities to keep business and money moving,” B of A’s Haggerty said in her email.

Banks will have to provide services to their clients through every channel they wish to use and those channels, particularly digital ones, have expanded through the pandemic, Gurney added.

“We have to operate more efficiently, we have to reduce our footprint and overhead, and automate everything that we can possibly automate,” she added.

Union Bank will soon introduce its Bank Freely Business checking account, which comes with no monthly service charge or ATM fees.

Hollander described it as a very straight forward account that is very easy to manage. A business owner can administer it 100 percent from a PC, he said.

“I think that’s what you’ll see more of,” he added, “is driving that convenience to our client base because they need to concentrate on their businesses.”