On March 26, the day before the CARES Act was passed, the country had about 1,600 certified Small Business Administration (SBA) lenders, said Charles Potts, senior vice president and chief innovation officer at the Independent Community Bankers of America (ICBA).
“In any given year probably not half do SBA loans, and then overnight Treasury said there will be 5,000 more SBA lenders the very next day.”
He thinks Mike Tyson’s quote fits the scenario: “Everybody has a plan until they get punched in the mouth.”
Any plans that community banks had made were upended by the new job handling SBA loan applications.
Bank of Luxemburg in northeast Wisconsin processed 375 PPP loans for $30 million to support 5,500 ... [+]
“We have been in good reaction mode,” Potts said. Banks had a lot of agenda items they had to throw away and start all over to meet the demands after the Fed decided the best way to get money out to businesses was through the SBA loan program.
“We saw some banks take the tech they already had and figure out how to utilize it. Some embraced new technology and stood up new services, from taking applications digitally and the processing of those applications.”
Their results showed in the numbers. The lion’s share of the first wave of PPP loans, around 60%, went through community banks, Potts said.
“You have an application, take it in, underwrite it, do risk analysis — banks marshaled a set of services and capabilities they they had or their vendor partners had, to tackle the specificity of the PPP loan. Four thousand brand new SBA lenders went to find the tools they didn’t have and were able to get a large number of loans processed. In four weeks banks did more PPP loans than they did in all the previous calendar year, so workflow management became an issue for a lot of banks.”
Banks found some support from fintech firms that had been through the ICBA incubator program. Potts said the program had its first cohort in 2019 and the second ended in March when the crisis hit.
Charles Potts, senior vice president and chief innovation officer at the ICBA
“Because we had these startup early stage companies and had worked with them on how to work with community banks, there were a number of vendor relationships our bankers could tap into quickly.”
The 12-week program gives entrepreneurs access to passionate community bankers so the startups can really refine their solutions to meet the needs of community banks, he said.
One example is Teslar, a portfolio management system that aggregates and automates loan and deposit processes into a single system. It has worked with the Citizens Bank of Edmond to help small businesses, non-profits and sole proprietors across the country manage the PPP loan forgiveness application. They have developed a website, PPP.bank, which is a free resource built by Teslar Software that any PPP loan borrower can leverage to get an estimate of the forgiveness for their PPP loans and to generate a PDF application to share with their lender.
Sajil Koroth, CEO of KapitalWise, said his company participated in ThinkTECH and the PPP loan program.
“Our solution provides community banks tools to better engage and understand their small business customers through data and insights.”
For the PPP program, it deployed its data analytics to help a money center bank, which it can’t name, aggregate data from small business borrowers to understand current and future cash flows for underwriting and risk assessment.
Tracy Fox, chief revenue officer at Botdoc, another fintech from the ThinkTECH program, said “The program helped us to understand the challenges community banks face when it comes to technology adoption.
“Banks looked to the ThinkTECH program for solutions to the PPP Loan Process problems. ThinkTECH delivered by offering multiple fintech companies that had solutions to the very problems that banks were trying to solve. This is powerful - it was a lifeline, that one phone call, that banks had to engage innovation.”
Botdoc provides a way to transport data and documents with end-to-end encryption without using pins, passwords, logins, accounts, apps or software to download.
Commuity First Bank in southwestern Wisconsin called Botdoc on Monday March 30, onboarded 21 bank employees on April 1 in less than 20 minutes and started taking application April 2 with no changes to the bank’s IT. It required no IT support calls and is now centralizing its PPP loan forgiveness outreach.
“The PPP Loan process required the banks to collect applications and supporting documentation, remotely and securely, while making it convenient for the applicant (consumer). We had dozens of banks using Botdoc to streamline the real-time remote collection and sending of needed documents. The fact that it was secure and convenient allowed the banks to deliver an exceptional consumer experience.”
AK Patel, founder and CEO of Lendsmart, said ThinkTECH was very hands-on.
“We worked directly with community banks on a daily basis, so we were able to get direct feedback from the bankers and injected that into our product offerings. For the PPP program specifically, the community banks we were in talks with for Lendsmarts mortgage solutions asked if we were about to re-purpose our technology to help streamline intake of the PPP loan application. We did exactly that — we adjusted our initial mortgage product to fit the PPP requirements.”
The result was a 600% increase in loan production.
“We took a lengthy application process and cut it down into 20 minutes. We shortened the window to get those loans funded within 10 days.”
Potts said the response of ThinkTECH graduates showed the program’s value to community banks.
“There is nothing like this program in the country. It’s tightly focused — we have our bankers tell us specifically what the challenges are that they need addressed, and then we search for mission-driven solutions purpose built for the community banking marketplace. The amount of attention an entrepreneur gets through the program is unparalleled.”
