Best Practices for Working with Lenders on COVID-19 Loans · Best Practices for Working with Lenders on COVID-19 Loans Barry Haugen, President Independent Community Banks of ND. Tuesday,

Best Practices for Working with Lenders on COVID-19 Loans

Barry Haugen, PresidentIndependent Community Banks of NDTuesday, April 28, 2020

Discussion Outline

• Paycheck Protection Program (PPP) version 1• PPP Version 2• PPP Version 3,4,…• Terms and Requirements• Loan Forgiveness & Best Practices• Communication with Your Lender and Advisors• Consumer Aspects• Q & A

Paycheck Protection Program Version 1

• $349 billion• April 3, 2020• Funds depleted April 15, 2020

Paycheck Protection Program OverviewStates With Comparable Population To ND

Amount of $$$ Per Capita Amount of $$ Per Capita Average Small Business

State Population # of Loans Loan Amount # Small Business Based on # Small Business Based on Population Loan Size

Wyoming 572,381 7,618 837,018,372$ 137,665 6,080$ 1,462$ 109,874$ Vermont 627,180 6,983 1,000,127,478$ 76,900 13,006$ 1,595$ 143,223$ Alaska 735,720 4,842 921,927,504$ 69,115 13,339$ 1,253$ 190,402$ North Dakota 760,900 11,002 1,548,384,035$ 72,723 21,292$ 2,035$ 140,737$ South Dakota 892,531 11,324 1,369,616,339$ 84,440 16,220$ 1,535$ 120,948$ Delaware 975,033 5,171 1,090,415,848$ 77,306 14,105$ 1,118$ 210,871$ Rhode Island 1,056,738 7,732 1,335,777,801$ 95,390 14,003$ 1,264$ 172,760$ Montana 1,074,532 13,456 1,470,300,136$ 118,315 12,427$ 1,368$ 109,267$ Maine 1,342,097 14,993 1,944,425,549$ 141,448 13,747$ 1,449$ 129,689$

Source: Bank of North Dakota

$-

$5,000

$10,000

$15,000

$20,000

$25,000

Wyoming Vermont Alaska North Dakota South Dakota Delaware Rhode Island Montana Maine

$6,080

$13,006 $13,339

$21,292

$16,220

$14,105 $14,003 $12,427

$13,747

Thou

sand

of D

olla

rsPPP Loan Dollars Per Capita Based on Number

of Small Businesses in States with Comparable Populations


$-

$500

$1,000

$1,500

$2,000

$2,500


$1,462 $1,595

$1,253

$2,035

$1,535

$1,118 $1,264

$1,368 $1,449

Thou

sand

s of D

olla

rsPPP Loan Dollars Per Capita Based on State Population


$109,874

$143,223

$190,402

$140,737

$120,948

$210,871

$172,760

$109,267

$129,689

$-

$50,000

$100,000

$150,000

$200,000

$250,000


Thou

sand

s of D

olla

rsAverage Small Business PPP Loan In States with Comparable Population


PPP and EIDL Version 2 – Kicked Off Yesterday

• PPP Expanded by $310 Billion• $250 Billion• $30 Billion for Community Banks from $10-$50 Billion in Total Assets• $30 Billion for Community Banks less than $10 Billion in Total Assets

• EIDL Expanded by $60 Billion• $50 Billion for Loans• $10 Billion for Grants

PPP Version 3 and Beyond???...

• Forgivable Stimulus – Just PPP• $349 Billion Round 1 – April 3• $310 Billion Round 2 – April 27• $659 Billion Total Thus Far

• Don’t Expect Round 2 to Last Through This Week• Much Discussion About Another Iteration

Terms and Requirements

• Regardless the Version of Your Potential PPP• PPP Provides Small Businesses with Funds to Pay Up to 8 Weeks

of Payroll and Related Costs• At Least 75 Percent of Proceeds for Payroll Related

• Details of How to Calculate Maximum Loan Amounts by Business Type can be found at https://home.treasury.gov/system/files/136/How-to-Calculate-Loan-Amounts.pdf

• Just released this past weekend.

https://home.treasury.gov/system/files/136/How-to-Calculate-Loan-Amounts.pdf

Terms and Requirements Cont’d

• Other Funds Can Be Used for Rents, Utilities, & Interest on Covered Mortgages (that existed at 2/15/2020)

• All Can Be Forgiven – But None Has to Be Forgiven• Unforgiven Amounts – 1.00 Percent APR with 2 Year Maturity

Next Step - PPP Loan Forgiveness

• Covered Period for Forgiveness Purposes is 8 Weeks Starting with Initial Disbursement of the PPP Loan

• For Going-Concern Businesses as of 2/15/2020• June 30, 2020 Sunset for Applications (not going to be an issue with PPP

Version 2)

• Forgiveness Requests Through Your Lender Can Begin after Week 7 Following Disbursement

• Specific Guidance Regarding Forgiveness Process Is Pending Regarding Process, Formula, Calculations, etc.

Until Then, PPP Loan Forgiveness Process Recommendations

• Ultimately:• Businesses Will Have to Attest/Certify to Requested Forgiveness• Lenders Must Conduct Their Due Diligence to Attest/Certify

Reasonableness• Actual Requests Can Be Made 7 Weeks After First Disbursement

• So, Begin Communications Immediately with Your Lender and Internal/External Support and Advisors

PPP Loan Forgiveness Process Recommendations

• Immediately Following Disbursement:• Track Loan Proceeds and Eligible Expenses• Maybe Separate Accounts; Certainly Tracking Spreadsheets, etc.• Estimate Eligible Payroll Expenses and Evaluate Requirements During

Forgiveness Period• Also Estimate Rent, Lease, Utilities, Interest Expenses During Forgiveness

Period (Again….8 Weeks from Initial Disbursement)


• Within 30 Days of Disbursement:• Understand That if There Has Been A Decrease from the Comparable

Period, Those Decreases Need to Be Eliminated by June 30.• Monitor Employee Pay so No Reductions Are More than 25 Percent• Focus on Supporting Documentation:

• Payroll Reports• Invoices• Receipts• Any Other Evidence that Substantiates Eligible Expenses Were Paid


• By the End of the 8 Week Period• Maintain Communications with Lender and Advisors Regarding

Forgiveness Guidance• Gather All Supporting Documentation Relative to Payroll-Related Costs

and Other Qualified Expenses• Complete Application for Loan Forgiveness (Don’t Know What That Looks

Like Yet) in Concert with Lender and Advisors• Remember the Goal: Provide Solid Documentation and Evidence for

Forgiveness of All Qualified Expenses Per the CARES Act.

Other Communications with Lenders

• These Are Unprecedented Times• How Could Cash Flow and Business Operations Not Be Affected• Banks Fully Expect and Are Dealing with Their Customers’

Hardships – Relationship Banking!• Bank Regulators Also Recognize the Need for Flexibility, and Have

Relaxed Regulations/Requirements/Etc. Relative to Lenders Working with Small Business Borrowers

Other Communications with Lenders

• Loan Modifications Are the Norm• Restructuring Terms• Restructuring Amortization Schedules• Short Term Interest Only

• Stay In Close Communication with Your Lender

Consumer Aspects

• We Are All Consumers• Employees, Co-workers, Family

• Many Options Available for Consumers to Get Through• Student Loans Forbearance

• Bank of North Dakota• Home Mortgage Forbearance

• Federally Backed or Owned• 6 Months + 6 Months, If Necessary

• Other Consumer Loan Potential Hardships• Credit Card – Skip-A-Payment Options May Be Available• For Any Portfolio Loans Held by Your Local Institution – PLEASE Contact Them.

Questions?

Barry Haugen, PresidentIndependent Community Banks of NDTuesday, April 28, 2020

Documents

Best Practices for Working with Lenders on COVID-19 Loans · Best Practices for Working with Lenders on COVID-19 Loans Barry Haugen, President Independent Community Banks of ND. Tuesday,