Andrew Foster, Kelly Hamill: First Aid–Paycheck Protection Program Begins
Andrew Foster afoster@mba.org; Kelly Hamill khamill@mba.org
(Andrew Foster is MBA Director of Commercial/Multifamily Policy; Kelly Hamill is MBA Associate Director of Commercial/Multifamily Policy.)
CARES Act & Paycheck Protection Program (PPP)
After President Trump signed the CARES Act into law on March 27, program details were released on April 2 for the Paycheck Protection Program administered by the Small Business Association and Treasury, which started April 3.
The $2 trillion CARES Act bill is designed in part to provide liquidity to small businesses—including hard hit hotels—who will turn to the program first to cover costs such as payroll, utilities and interest on debt payments. Commercial real estate borrowers, tenants and their employees are prime candidates to apply for the program and many of MBA’s member banks will be instrumental in getting this $350 billion of relief to small businesses and their employees in communities across the country through their SBA lending programs.
A list of implications of the CARES Act for CREF members can be found at
http://mba-pc.informz.net/mba-pc/data/images/CREF%20Summary%20of%20CARES%20Act%20-final%20bill%20-%2003-26-2020%20final.pdf. CREF members can join MBA and industry experts for a deep dive into CARES Act implications by attending April 10th webinar. To register, click https://www.mba.org/store/events/webinar/commercial-real-estate-finance-and-covid-19-cares-act?check_for_mini_site=Y.
Outlook for Implementation
The challenges involved and scale of lending contemplated are as unprecedented as the current crisis, and the speed at which the program is to be executed is very ambitious. Staffing and training SBA lending partners to process the number of expected requests on a new program will be a herculean task. Clearly, controls are an important part of program guidelines and its overall success. Many banks are unsurprisingly focused on loans for their existing customer relationships which should more effectively get loans to businesses that legitimately need them.
During this crisis, banks continue to manage their entire operations in a challenging work environment with limited services open for business. As such, some of the loan requirements around the need and timing for appraisals, inspections and other required tasks require creativity and flexibility from stakeholders. Fortunately, markets have already seen swift acknowledgement of and responsiveness to these type of challenges from government lending programs such as FHA, Fannie Mae and Freddie Mac platforms.
Expected Impacts and Potential for Unintended Consequences
Initial reaction has been focused on the slow rollout of the program on the first day; while time is of the essence in a crisis, the incredible magnitude and scale of the effort that goes into such a large program is humbling and needs to be judged with nuance and understanding. It is a large scale operation to set up in a very short period time to address an incredibly complex series of constantly evolving issues. The program will ultimately be judged on its ability to help stem the failure of millions of businesses across the U.S.
Many MBA member firms will make these funds available through their SBA lending programs while others will be consumers of the loans. MBA applauds Treasury and the SBA for the additional clarity provided in the announced program guidelines.
“We look forward to continuing to work with SBA, Treasury and our industry to help facilitate the most efficient and effective outcomes possible for small businesses in this unprecedented and challenging market environment,” said Michael Flood, MBA Senior Vice President of Commercial/Multifamily Policy and Member Engagement.
