PPP forgiveness is fraught with peril for bankers. Done the wrong way, and it will suck countless resources. Aside from having a good process and/or technology platform, having a marketing plan will be the difference between success and failure. If done correctly, an application can take 20 minutes to review and approve. If done incorrectly, that same application will take over three hours. Thinking through the process now as previously laid out in our articles ( HERE, HERE, and HERE) plus the below marketing plan can be the difference between success and failure.
Just take one tiny aspect of the program – mortgage interest and/or rental expense. This is one of the most effortless calculations to verify but one of the most time consuming to verify.
The inclusion of mortgage or rental expense is probably the most straightforward aspect of the Forgiveness process. However, bankers will need to make a reasonable effort to verify the borrower's calculations. If a PPP borrower submits six mortgage or lease agreements, each at an average of 11 pages and the information such as borrower name, contract dates, payment amount/interest rate, terms, escalation clauses, amortization, contract dates, signatures, and other miscellaneous items, and that one effort can take bankers approximately 47 minutes. We know because we have been testing this.
Educate the borrower ahead of time, letting them know what pages you want them to submit and how to highlight the salient points of information, and that time spend on confirming mortgage interest and/or rental expense can be reduced to less than 10 minutes.
That is a massive difference in time, and if you multiply that over 1,000 applications, that the difference between spending 167 hours on this effort and spending and spending 783 hours on just one of a dozen points of verification and approval.
Validating utility expenses also has a similar issue. While the information is typically formatted in a more organized and standardized way than lease agreements, each location could have seven utility bills or more. Six locations mean 84 different bills over eight weeks, each two pages long. It took us 15 seconds a page to validate the data, which resulted in an expenditure of approximately 42 minutes per application. In addition, many bankers will want to verify that the actual payment was made, thereby taking up and additional 20 minutes.
While not every one of your applications will have six properties, some will have 25 or more. Further, our tests were on companies that we knew and that were well organized. Borrowers that are going to mix utility statements, invoices, voided checks, bank statements, napkins, and who knows what else could suck much more time as now you will also have to go back-and-forth with the borrower as you get the proper documents and need to figure this out.
All this expenditure in energy can be reduced by having both a proper process in place and the right messaging. While we have covered the process before, next is our details on our marketing plan.
Next to thinking through and having the right process, the critical factor here is to have an effective marketing plan to educate your customers.
In addition to SBA weekly updates, bankers should have the following information available on their website and send the following emails in a series at least once per week:
Week of May 18th
Needed documents and an overview of the process: Let borrowers know what documents will be needed, an overview of the Forgiveness process, and how to keep records in an easily accessible form. Some banks are encouraging establishing Box, Dropbox, Google doc, or similar accounts to help speed the process and allow the sharing of information.
Fraud Warning: Just as many scam artists promised to help a small business get PPP money, there is now a rash of criminals looking to scam PPP borrowers to help with “fast-tracking forgiveness.” Customers should be reminded to stay alert and to report these and other more traditional scams such as email compromises, investment fraud, money mule recruitment, benefits fraud and consultancy scams.
Week of May 25th
8-Week Period Option: Education customers between the difference of using the Covered Period and the Alternative Payroll Covered Period for its Payroll Calculations. Let the customer know what payroll records are needed and what is the desired form. Conduct a survey of your customers to better understand who will shift to an Alternative period to help inform your staffing model.
Mortgage Interest and Utility Expenses: Borrowers should be reminded of eligible non-payroll expenses and to start gathering records dating from February 2020 through the end of the Covered Period of payments on real or personal property mortgages, lender amortization schedules, lease agreements for real or personal property, utility invoices and canceled checks or electronic banking records reflecting payments for these non-payroll costs. Borrowers should be reminded that they will also need evidence of mortgages and leases as well as copies of utility invoices dated before February 15th, 2020, to show that these obligations were in force before that date. The key here is for the bank to decide how it wants this information organized as these documents could be long, and information could be distributed throughout the document.
Consider creating a template to help borrowers organize both mortgage, rent, and utility expenses so your bank's processing team will have an easier time reviewing the information.
Week of June 1st
PPP Forgiveness Platform Release: By this time, banks should have a decision on when they will release their technology platform or when they will start accepting forgiveness applications. While the week of June 15th is the soonest some banks are planning to start the process, most banks will wait until July 1st or after borrowers have their IRS 941 payroll filings available.
Week of June 8th
Final forgiveness calculation: By this time, banks should have complete information from the SBA and should plan on walking their customers through the calculation one more time. Some banks and platforms will provide an Excel-based calculator to help with this effort. Borrowers will likely have at least one month's worth of data, so they can now have an opportunity to find all applicable expenses and find out which of their expenses will delay them the most.
Timing Expectations: Banks will also want to set expectations on when borrowers will find out process timing and when they might hear about the status of their forgiveness application. Many borrowers heard quickly back quickly as to their PPP origination status and now have expectations of something similar. Because banks have 60 days to process an application and the SBA can have 90 days to render a decision, it will likely be months before borrowers hear back when many are expecting to hear back in days. Adjusting expectations now will save an array of phone calls and emails.
Week of June 15th
Bank Interest Due: All PPP borrowers that have an existing loan with the bank should be reminded in a personalized email what exactly the past or current due interest is that could be included in the forgiveness calculation. This email will serve both as a reminder but also as a time saver to find the exact interest amount applicable to the forgiveness application (since the bank knows it and can save time for the borrower.
Certification: We suggest taking this week to stress the importance of certification in order to hopefully improve the accuracy of information received by the bank, thereby reducing processing time. Inform borrowers that when submitting the Loan Forgiveness Application, they will be certifying to the following: 1) They have verified the payroll and non-payroll costs for which they seek forgiveness; 2) They understand that the government may pursue civil and criminal remedies for knowing misuse of borrowed funds and for false statements and bank fraud; 3) They have submitted the required documentation for forgiveness; 4) They have submitted or will submit tax documents to the IRS consistent with those submitted to the SBA; and, 5) They acknowledge that the SBA can request additional information to evaluate loan forgiveness.
These five points should help borrowers understand what you will ask them to do and to prepare accordingly.
Week of June 22nd
How To Complete The Application: In addition to a final update by the SBA, many banks will choose to unveil their final process or release their technology during this week. Banks should plan to have their borrowers go hands-on an learn about their process and get into the details. If the technology is not ready, at least release screenshots or gifs that will at least show the borrowers the process they will be going through.
Produce a video or tutorial walking customers through how to complete the entire application (not just the calculations). Highlight the fact that borrowers will have the option of including demographic information at the end of the application, and if they don't complete, it will not hurt their chances or timing for approval. Bankers don't want borrowers getting to this point for the first time and having to stop while they ponder or research this data request.
Stages and Communication: If your bank has distinct workflow stages and messages, an email highlighting the details of the process and the frequency of communication is best. For example, our process has several workflow stages such as "Ready for review," "In review," "Review completed," "Submitted to SBA," "Approved by SBA," "In documentation," "Awaiting final application signing" and "Loan terms are updated." At each stage, the borrower could get an email update as well as a system notification if they log back in. In addition, banks will then need an additional workflow and communication stream for updating the borrower's loan should 100% forgiveness not be achieved.
Week of June 29th
Final Update: It is during this week that the majority of banks will release their platform and provide customers with a final update as to the process.
Document Retention: Remind borrowers they must retain a copy of all forgiveness documents submitted to the bank, as well as the worksheets, all PPP application and loan documents, Safe Harbor evidence, and all documentation related to its eligibility and necessity for six years after the date the loan is forgiven or repaid in full.
Week of July 6th
Once your PPP Forgiveness process is live and going, your system or custom status updates will keep the customer engaged for the next four weeks (how most banks are designing it). As the borrower is walked through each stage, they are also prepared for what will come next. These emails should be crafted now if the bank has not done so already and automated to the extent possible.
Week of July 13th
7(a) / Conventional Financing Transition: In addition to stage or status updates about the borrower's PPP forgiveness applications, now banks need to start communicating the plan for permanent financing options if they have not done so already. August and September are predicted to be when the next major wave of the credit shocks hit, and borrowers need to be well on their way to finding a more permeant capital solution.
We are expecting an updated set of 7(a) terms that will be released by then, which will then start that process. Banks should plan on communicating those details and start to transition the customer into a more laborious 7(a), three-week application, and approval process.
Putting This Into Action
Banks that market correctly should find about 10% better forgiveness performance than banks that don't. That is a massive difference for the customer as well as for the bank. In addition, banks that have gotten their marketing and communication right will save a material amount of expense that, by our estimation, will be greater than 30%.
If your bank has not done so already, use the above suggestions to put a PPP Forgiveness marketing and communication plan together that will help accelerate performance. The time to do this is now while there is a lull in the PPP forgiveness transition.
In conjunction with our partner SmartBiz, we make out PPP Forgiveness and 7(a) platform available that comes complete with marketing and strategy. For more information, go HERE. To see a recording of our recent demo, please watch below.
Submitted by Chris Nichols on June 02, 2020