MILWAUKIE, Ore.—After making 252 Paycheck Protection Program loans for almost $17 million in 2020, Clackamas FCU says interest in the assistance has waned in 2021.
“It seems volume is down a bit,” Chief Lending Officer Kimo Rosa told CUToday.info. “The requests are still coming in, but it seems to be about half what we experienced last year.”
Rosa said Clackamas Federal has not been surprised by the slowdown.
“In the discussions we’ve had with our peer groups prior to the opening of the second draw in 2021, everyone has more or less said they were expecting applications to slow this time,” Rosa said.
As CUToday.info reported, the new round of PPP in 2021 opened Jan. 11.
A slowdown would have been welcomed last year at Clackamas, Rosa shared, relating how the PPP loans it made tested the limits of the credit union’s human resources.
“We're not a big credit union. We just broke $500 million in assets,” said Rosa. “And last year, of course, was the first time we did something like this. This time we're much more prepared. We've already been through this first round, so we kind knew what to expect this time.”
What’s leading to fewer applications in the 2021 draw?
“I am not sure there is any one answer,” stated Rosa. “It could be because some businesses don't understand the changes with the second draw. Or maybe they're just not as interested in getting the funds this time. The businesses, as well as the financial institutions, in the first round last year had to deal with a lot of the headaches that came with this. Maybe that has led borrowers to not apply.”
A Smoother Process
Rosa said Clackamas learned some lessons during the first round of PPP that have led to improvements in its internal processes in 2021. In addition, better communication from the credit union to potential borrowers has smoothed out many of the bumps encountered last year.
“As you may recall, everything about PPP came down quickly last year,” said Rosa. “There was a short window from when the program was announced to when people could take out a loan. It was like, ‘Just come on down to the bank or credit union and get the money for your business’.”
The scramble for funds was exacerbated by a lack of clear communication from the Small Business Administration and Treasury, which were changing rules and guidelines weekly, if not daily during the first draw period in 2020, numerous sources complained at the time.
“Back then we kind of waited and watched for the SBA or Treasury to provide information,” Rosa said. “There was just so much to keep up with.”
Another Lesson Learned
Kimo Rosa
Early last year Clackamas faced a large number of small businesses bringing in paper applications.
“They would just drop them off at the drive-thru, because that is what they were basically told to do by the media and elected officials,” Rosa recalled. “But we need these applications to be processed electronically, and we didn't have the time to manually enter them.”
That led to Rosa and his five-person team calling back those members who dropped off paper applications and asking them to go to the credit union’s website to complete an online PPP application.
“This year we knew right away that we needed to communicate to our business members, especially ones who already received their first draw,” Rosa explained. “We communicated to them and let them know upfront about the proper process to apply. We also told them in the communication that they would not have to call us about any PPP updates, as we would be posting updates on our website as soon as we get them. The activity for PPP on our website has gone way up this time, compared to last year, and we have controlled the flow and the traffic a lot better.”
Clackamas FCU has also improved is PPP loan origination software.
“The SBA and Treasury last year were putting out PPP interim final rules almost daily. There just was so much to keep up with,” Rosa said. “That created a lot of challenges for us with our loan application software. This year we’re using software from Abrigo, which has performed very well.”
Decision Pays Off
Rosa noted in 2020 the credit union decided to make PPP loans available to any business located within its communities. And while that has added to the workload, the upside has been a significant gain in business.
“Last year we set up a team that worked in our branches just focusing on business account openings,” he said. “We wanted to make this loan available to all potential businesses within communities. A number of the credit unions in our market said you had to be a member to apply for a PPP loan. We saw a large influx of business loans and new business accounts from this.”
Rosa said the work last year tested the limits of the business lending team staff, which included staffer Katie Gillespie, who had previously worked with the SBA. Rosa credited the efforts of the entire team for working long hours and managing through a difficult, new process.
When Rosa spoke with CUToday.info in the first two weeks of the PPP draw period for 2021, the credit union was seeing a lot of repeat business from borrowers who received a PPP loan in round one. Rosa also said borrowers who may have had issues with the forgiveness portion of PPP may have decided not to apply in 2021.
What the Numbers Show
“We have processed 26 application for $2,093,990,” Rosa said. “We have an additional 50 applications in progress totaling $3,853,707. We are targeting $8.5 million in total funding for the second draw.”
Near the close of January, the average loan for the second draw from PPP borrowers at Clackamas was $80,538. The median loan amount was $38,230. The largest request was almost $500,000 and the smallest $1,346. Rosa compared that data to 2020 PPP numbers.
“The percentage of loans and balances greater than or equal to $150,000 during 2020 first draw PPP was 12%, making up 54% of the balances,” said Rosa. “This makes the average PPP with Clackamas (during round one) $66,630.16, the median loan amount was $23,413. The largest loan was just north of $900,000 and the smallest was $758.”