Government and private sector businesses are moving so rapidly during the first week of the $2 trillion CARES Act, that we can already draw some lessons going forward. This is so especially for the $349 billion Paycheck Protection Program (PPP), the main vehicle rushing funds to small businesses to stem additional layoffs and permanent business closures. [...]
To help us understand these dynamics we are joined once again by Ms. Nanette Heide, Co-Chair of the Private Equity Division and also by Ms. Sandra Stoneman, Co-Chair of the Emerging Companies Group at Duane Morris LLP. Both have been in close contact with businesses during the past week, who are considering PPP or have applied.
1. The speed by which the loan process was established suggests how quickly government and the private sector can act when a sense of urgency is present: Over the past week, the Small Business Administration (SBA) continued to develop PPP application guidelines, issuing several advisories, as late as Thursday evening. Still by Friday morning, hundreds of banks and financial institutions were on line accepting loans. Bank of America was the first of the large banks to begin accepting PPP applications on Friday, and reported receiving 10,000 applications within the first hour, and more than 85,000 by the end of the day (totaling $22.2 billion in loan requests). JPMorgan Chase opened its application portal by Friday afternoon, and Wells Fargo announced plans to open within a short time. By this upcoming week, most banks and other financial institutions should be online.
Many banks started with a policy of loans only to existing clients. However, in line with the current sense of urgency, these banks and others in the past three days have come forward to open their processing to non-clients. This should extend the program particularly to the more vulnerable small businesses who may not have strong banking ties—a main goal of PPP.
There are trade-offs in program integrity with the Mach 3 speed implementation, as noted below. But what we do see from the first week is how SBA and financial institutions can accelerate processes.
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