July 1, 2020
Loan Forgiveness Takes Center Stage

The end of the month signifies the conclusion of the first stage of the Paycheck Protection Program and the transition to the next phase: forgiveness.

Although initial demand for PPP loans came in tsunami-like waves, the program officially ended with about $134 billion unclaimed, out of $660 billion allocated, at the end of June. Now, banks like Boston-based Berkshire Hills Bancorp are preparing to transition to the forgiveness stage of the program, which could last several quarters.

Berkshire Hills aims to begin accepting forgiveness applications on July 1, says Greg Poehlmann, senior vice president of the bank’s 44 Business Capital division. He expects “staggered” PPP forgiveness activity but notes that banks have 60 days to process an application once it’s received. In the meantime, his group at the $13 billion bank has spent the past few weeks digesting forgiveness guidance and learning lessons from the PPP application process to make processing forgiveness applications “a little more efficient and seamless.”

The challenge of issuing and forgiving PPP loans has made for some unusual alliances. For example, Mark Cuban, entrepreneur and owner of the Dallas Mavericks basketball team, and Jill Castilla, chairman and CEO of $292 million Citizens Bancshares in Edmond, Oklahoma, launched a free website that helps borrowers streamline the 11-page forgiveness application before submitting it to their lender.

“The chaos that was the application phase will not be as chaotic in the forgiveness phase,” Poehlmann says. “However, it is a little bit more complex, with more hand-holding or explaining in this phase.”

Part of that complexity comes as 44 Business Capital implements a new automated forgiveness application, which could make the process easier. Some of that comes from changes to the program from Congress. Already, lawmakers lowered the requirement that 75% of the funds be spent on payroll to 60%, with an option of partial forgiveness for payroll spending under the threshold. 

He says communication between bankers and borrowers will be “paramount” as the industry transitions into the long grind of loan forgiveness. Still, after numerous weeks of long hours spent processing PPP requests, Poehlmann says he’s looking forward to this next stage of the program.

“To be candid, I was a little anxious about this forgiveness aspect,” he says. “But I’ve mapped out a process flow, and I feel better about things today than I had.”

Kiah Lau Haslett / managing editor for Bank Director
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Bank boards are mulling how to reward employees for their efforts during the Covid-19 crisis while keeping a lid on expenses in an uncertain and challenging operating environment.

“We will find a way to reward our employees. At the same time, if earnings aren’t there, we’ll also do a very effective job of making sure that they recognize that it’s a unique type of year.” — Stephen Burger, Walden Savings Bank

Kiah Lau Haslett / managing editor for Bank Director