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How Valley small businesses wantlenders to handle the second round of PPP loans


During the first round of Paycheck Protection Program funding, lenders offered tips to help small businesses navigate the new program created by the CARES Act.

Now, small businesses have some advice of their own for bankers for the next round of $320 billion funding.

Granted, the first round of the PPP program — $349 billion for small businesses to keep their employees working — was brand new. Everyone was learning on the fly.

But there were a lot of glitches in the program that led to small businesses filing lawsuits against some of the larger banks for the way they handled applications.

John Balitis, chairman of the Labor & Employment Department for Jennings, Strouss & Salmon PLC in Phoenix, said banks can learn from those lawsuits going forward.

For one, he said, don’t favor certain customers over others in processing PPP loan requests, he said.

One allegation of the lawsuits is the banks allegedly shuffled applications to put large clients first in line, Balitis said.

“The contention is that the larger loan the higher the origination fee for the bank, which explains the alleged incentive for prioritizing applicants unfairly,” he said.

Some of the banks that failed to receive program funding in the first round allege that banks started working with preferred customers in advance to get applications and related documentation in order ahead of time, he said.

“This alleged misconduct ensured that certain bank customers received funds because they had an advantage over other applicants that were waiting for basic instructions on how to proceed,” Balitis said. “Clearly, the lesson to be learned by these allegations is that banks in the second round should not artificially prioritize one customer over another, but instead, should handle applications on a first come first serve basis.”

The more communication the better, said one small business applicant who didn’t get funding in the first round.

E. John Banquil Jr., president and CEO of Ling & Louie’s Asian Bar and Grill in Scottsdale, said a lot of the lenders using electronic applications didn’t follow up with any communication as to whether the application was complete.

“It took me several days to get a hold of someone only to find out that they needed a copy of my license before they could submit, but the application never asked for that,” he said.

Lain Ehmann, founder of FastLain, a marketing and consulting firm in Phoenix, said bankers should not send the same email multiple times.

“I’ve now received the same exact email ‘update’ from Wells Fargo three times over the past week,” she said. “It makes me wonder if there is a glitch in the system. If not, it just makes you look lazy.”

She also suggested that lenders give small businesses a place to go for questions.

“We know you’re making money off this whole process, so treating us like cattle and telling us ‘Don’t call, don’t email’ doesn’t fly,” she said. “We need a contact to go to for updates and questions. Most of us are bank customers and you’re treating us poorly. Don’t be surprised if a lot of us jump ship after this is over, based on how you’re treating us now.”

Ehmann, who didn’t receive the $6,000 loan she applied for, also recommends creating a Frequently Asked Questions document and update it in a timely manner.

“For instance, I’m concerned about how the new class action suit against Chase and Wells Fargo will impact my PPP loan application that’s been submitted, but not yet funded,” she said. “Be upfront and tell us what’s going on.”

This is a good opportunity for a bank to demonstrate outstanding customer service, which will have a long-term relationship payoff, said Jim Unruh, chairman of Gainey Business Bancorp Inc., a community bank in organization.

Because his bank won’t open until later this year or early next year, Unruh is sitting on the sidelines during the PPP funding opportunities.

“Making it a positive experience can be accomplished by providing guidance in advance of the information required, the important factors that need to be understood because they will subsequently determine if it remains a loan or will qualify to become a grant, and being very quick and responsive in assisting the customer during the application process given their fear of the funds running out,” Unruh said. “Also very important to the ongoing relationship is clearly demonstrating in the customer’s eyes that your process was both fair to them versus other customers and consistent with the intent of the program. This is an opportunity to accomplish good, and to solidify a relationship for the long term.”

Otherwise, small businesses very well may seek banking relationships elsewhere, he said.

Read the entire Phoenix Business Journal article.


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