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By: Virginia Varela
Published: 01/27/2021

Virginia Varela

Unlike when a friend asks you what you’d like for your birthday, you’re not likely to ever say to the federal government, “Surprise me!”

Yet this is what’s happening, positively (so far), with the newest iteration of the Paycheck Protection Program. Unlike before, PPP funds are being released to banks with a new, well, better degree of clarity, if not as much quantity.

Part of the success of the current distribution is that it’s being done with far less drama and hype. The government seemed to learn that the retail/management mantra isn’t “over-promise and under-deliver,” but rather its complete opposite.

Even the forms are relatively easier to fill out this time for small businesses. And when’s the last time you heard someone compliment the federal government on its forms?

What hasn’t improved is probably built into the DNA of such programs. As a community bank, we’ll be processing those loans, to be sure, but our top priority must be our longtime customers. Unlike the situation in a massive bank with multiple locations, our customers haven’t been “digitized” – we know all of them by face, name and dream, and serving them first is essential.

Last time, community banks ultimately did a good job funding PPP to small businesses, which account for 60 to 80% of all the jobs in our country. But we got tossed around a lot and many of us were reluctant to lend again this coming year.

As I wrote for the Sacramento Business Journal in 2020, “As the federal government began in April to wrestle with a variety of loan and bailout packages to help businesses and their employees stay afloat, confusion became the rule rather than the exception." Large banks whose past performances had caused regulators to put caps on their lending capacity found themselves having to turn away customers both big and small. Some banks tried to help only their existing clientele and still fell short. Then the authorities told them, in essence, "OK, maybe we made a mistake by overreacting. We’ll lift the cap we placed on you and you can do more PPP loans." But that fund was rapidly drying up; the result was that longtime bank/client relationships were damaged as well as the institutions’ public images.

Just in December, we took on what one banking industry commentator blogger called “an outsized share of Paycheck Protection Program lending.” Nationwide, community banks’ outstanding balance of PPP loans to total assets was 6.04% – compared to 1.81% for non-community banks.

Through the PPP, an allocated $4.89 million in forgivable loans were made, totaling more than $521 billion – and community banks made 28% of the loans, or $148 billion. The total share of PPP loans by community banks was much higher than their 12% share of total industry assets and 15% share of total industry loans, according to the Conference of State Bank Supervisors.

My bank funded a record number of PPP loans to small businesses in the first go-round – and because this rollout has been so much smoother, we’ll continue to offer PPP. So far so good – and I need to add another so far.

Even Jovita Carranza, administrator of the country’s Small Business Administration, told a sister Business Journal publication that this time, the PPP is working “for all small businesses across our nation,” not just bigger companies and well-connected firms who got into the program early on.

It was an encouraging comment.

Virginia Varela is president and CEO of Sacramento-based Golden Pacific Bank.

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