The Small Business Association’s (SBA) newly introduced Payment Protection Program (PPP) may finally have dried up, as the $350 billion in allotted funds for small businesses has already been reached. While this certainly comes as disappointing news for the businesses that still intended to apply for the loan, it’s also a testament to the tremendous demand for federal funds during the coronavirus period.
More interestingly, it’s a testament to the power of digitization to expedite the receipt of such funds in such a short time. Banks that want to continue to benefit from quick dispatching of funds should take this as a positive sign that their investment in agile technology is worthwhile, facilitating more efficient transactions at record speeds.
What is the Payment Protection Program (PPP)?
The Payment Protection Program is a fund capped at $350 billion designed to provide U.S. businesses with a loan that is designed to allow them to hold onto their employees, and continue to pay their salaries and benefits during these challenging times. The loans were facilitated through over 4,000 lenders.]
According to the terms of the loan, there is a provision for loan forgiveness. If they apply, small and medium sized businesses with under 500 employees are eligible for 2.5 times their payroll. The loan is forgiven, on condition that the firm continues to keep employees on the payroll over the next eight weeks.
The construction sector was the biggest sector to receive funding, at around $34 billion, but a diverse array of industries benefited from the stimulus, including scientific services, technology, and manufacturing. The average loan size was $239,152.
The role of digitization in PPP
Despite the program’s dramatic success, there were questions at the beginning as to whether the banks could keep up with the influx of demand. It was reported that multiple large banks took a long time to set up web portals that could process loans. However, once they did, things went smoothly and businesses that applied for a loan rapidly received them.
During this period of crisis, customers need banks to act quickly. Old systems don’t work for the level of speed, personal safety and compliance that’s required in the COVID-19 era. Even if the businesses they work with are traditional, banks need to take the lead of digitization and provide seamless, remote services.
One of Lightico’s banking customers, Texas-based Happy State Bank, exemplifies this reality. Thanks to a combination of flexible and intuitive mobile tools, and a good dose of creativity, the regional bank has been able to continue to serve both its retail and commercial banking customers during the crisis.
Thanks to digital-centric banks like Happy State Bank, $350 billion in aid was successfully deployed to small businesses across the country without a hitch. If there’s ever another time banks will need to facilitate such large-scale and urgent transactions, they will likely be even more prepared.