Why has demand for new PPP loans slowed down? Bankers weigh in

PPP - Why has demand for new PPP loans slowed down? Bankers weigh inJuly 31, 2020 (Courtesy of Jacksonville Business Journal) When the first round of funding for the Small Business Administration’s Paycheck Protection Program rolled out, the loan money dried up in about two weeks.

Fast forward and the second tranche of funding still has more than $100 billion left for small businesses to access after months. The deadline for companies to apply for the program was extended, moving the submission date from June 30 to Aug. 8.

After a hot start, why has demand for the PPP slowed?

Veritex Community Bank Chairman, CEO and President Malcolm Holland said it could be for several reasons. For instance, it could be because businesses have been able to reopen and able to keep respective employees employed. It could also be because many folks “just don’t want the government in their business,” he said.

Going forward, Holland said he thinks demand for the program will continue to slow. Veritex Community Bank, which is based in Dallas, processed over 2,000 PPP loans totaling more than $400 million.

Independent Bank Group Chairman and CEO David Brooks said that during the first tranche of funding there was a scarcity factor. But by the second round, people generally understood the PPP more fully and “everyone who needed and was eligible for the funding got it, either in the first tranche or early in the second tranche,” he said.

“Clearly, there is still a need in the economy for this kind of funding for small businesses,” Brooks said. “However, if you got your loan three months ago, even if you have another need now, you can’t reapply. You can only have one loan under PPP the way it’s written today.”

McKinney,Texas-based Independent mostly loaned to existing customers for the PPP and processed about 6,250 loans totaling about $820 million.

Pat Howard, president and CEO of Dallas-based T Bank, pointed out that a limitation of the PPP originally was that it was designed to help small businesses to keep employees on payroll, instead of keeping small businesses afloat in general.

“The PPP was not intended to keep them in business,” Howard said. “It was intended to keep their employees on staff. There are not a lot of businesses out there who would benefit from that particular – and primary aspect – of the program.”

Whether the program receives more funding is still up in the air, but Howard said he thinks there will be some sort of additional assistance for small businesses.

“I do not think there will be another Payroll Protection Program,” Howard said. “I think there may be additional funding for small businesses.”

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