Both the U.S. Senate and House of Representatives lost little time in the past couple of weeks crafting another coronavirus relief bill, this one valued at $480 billion and including $310 billion to replenish the Paycheck Protection Program.
The PPP contained funding for small-business loans through the Small Business Administration (SBA) designed to help businesses with up to 500 employees keep them on the payroll. If the business met requirements, all or a portion of the loan would be forgiven.
PPP funding in the previous relief bill had been quickly drained. The nation’s financial infrastructure was bracing to handle what was anticipated to be another tidal wave of SBA loan applications for PPP even with numerous applications still in the pipeline from last time.
One of the local banks that quickly geared up for the last round of SBA funding and was getting ready for the next round is M&T Bank Corp., a financial services company with more than $120 billion in assets. Founded in 1856 in Buffalo, M&T operates more than 750 branches in New York, New Jersey, Connecticut, Pennsylvania, Maryland, Delaware, Virginia, West Virginia and Washington, D.C.
In Westchester and Rockland during the initial round of the PPP, M&T was able to place more than 800 SBA loans providing more than $280 million to businesses having a total of more than 25,000 employees. Throughout its coverage area, M&T was able to provide $6.4 billion in funding to 27,711 businesses with more than 620,000 employees.
“We were about the sixth largest SBA lender in the country,” Frank P. Micalizzi, M&T regional president for the Westchester, Rockland and Connecticut marketplaces told the Business Journal. “That equated to us doing a little less than about 2,000 SBA loans a year. The first day out of the box that PPP opened up we had 25,000 applications that came in. Then, it crept up to close to 30,000 by the end of the week.”
Micalizzi, who has been with M&T since 2009 and had been with JP Morgan Chase for 30 years, said that 44% of the first round loan applications were for less than $50,000. Fully 95% of the applications asked for less than $1 million in funding.
“When you think about Westchester and you look at Fairfield County and you look at Connecticut and those markets, the payrolls are higher. It’s a higher cost of living and so what you’ll see is a lot of the criteria with the SBA was employee- and salary-driven so our average loan … was close to $350,000, where the average throughout the rest of the bank was close to $234,000,” Micalizzi said.
Micalizzi said that the applications came from a wide variety of business categories.
“A lot were payroll-driven employers that had service businesses, a lot of construction companies, some technical businesses, a lot of professionals, law firms, large CPA, health care, social assistance programs,” Micalizzi said, adding that some nonprofits also applied. “It ran the gamut as far as the industries involved. It was really impressive to see how widespread this effort was and how many industries were able to avail themselves of this program.”
M&T normally has an internal staff of about 200 handling SBA loans, Micalizzi said. For the PPP program, the bank increased that tenfold, “going from 200 to 2,000 employees within the bank that were reassigned within the retail side, which is the branches, the business banking side, the commercial or not-for-profit group. There were a bunch of colleagues that just raised their hands and said, ‘Look I’d be happy to help in this effort.’ Many of us worked through Saturday and Sunday in preparation for the program and certainly when it went live with the technology help that we received from the technology people and the guidance from the SBA, we were really able to accommodate a vast majority of the applications.”
The bank was able to readily accommodate existing customers in the application process because the already established accounts saved a lot of due-diligence effort, including duplicating compliance with the federal Bank Secrecy Act.
“You need a checking account or depository account to just credit the SBA proceeds. So we made a determination that many banks did early on to try to service your clients first and foremost because they were the easier ones to get through the pipeline. They already had depository accounts with the bank,” Micalizzi said. “We had to do a test to make sure that they qualified for it as interpreted by the SBA and then there’s a quality control to make sure that all the documentation that supported it was there.”
Micalizzi said that they felt very comfortable with the applications that they saw.
“One of the strict guidelines was the number of employees. So, the spirit of it was if you exceed a certain number of employees you were excluded from that program,” Micalizzi said. “So, the whole intent of it really was for small businesses that had payrolls that they really had to meet.”
Micalizzi characterized the magnitude of the economic impact from the coronavirus pandemic as unprecedented.
“I don’t think anybody imagined the ripple effect when you look at the supply chain and everything that’s been affected. It’s just so widespread it’s hard to comprehend,” Micalizzi said. “I think we try to service everybody but the backbone of M&T is small business and middle-market business. We’re pretty excited that we were able to help.”