PPP SMALL BUSINESS LOANS: How $525 billion in coronavirus-linked loans were spread across lenders, states, and industries

• This is an update to our May and July PPP Small Business Loans reports. You can purchase all three reports now for the price of one.
• This report outlines the final numbers after the second tranche’s summer expiry, and will be available for free to those who have purchased any of the two preceding versions of this report. 
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In April, the US government launched the historic Paycheck Protection Program (PPP) to provide financial assistance to small businesses struggling amid the coronavirus pandemic. A staggering $659 billion was allocated to the PPP across two separate installments, with funds for the $349 billion first round being tapped out in less than two weeks. But uptake slowed during round two as larger businesses returned loans following public outcry, while complex requirements and murky loan forgiveness guidelines deterred small businesses from applying. At the program’s close on August 8, $134 billion was left undrawn.

Banks that acted decisively in deploying PPP loans stood to earn new clients and goodwill from regulators, as well as a slice of billions in loan fees. Despite early missteps, they achieved much of what they set out to do, getting $525 billion of much-needed aid to US small businesses. Some banks had hitches in their PPP loan applications, funds weren’t going to the areas that needed them the most, and larger loans were favored by several institutions-but most of these issues were mitigated or rectified by the end of the program in August. Now their objective has pivoted to processing loan forgiveness applications, a task that might be even more strenuous than approving loans.

In PPP Small Business Loans – the final of three updates – Insider Intelligence looks at how different lenders fared at implementing the PPP by examining the available data on PPP lenders’ approval patterns and providing insights into how loans were spread across top lenders, geographies, and industries as of the program’s end on August 8. We assess the program’s overall effectiveness in distributing aid to US small businesses, and look ahead to potential future initiatives as the pandemic continues. 

The companies mentioned in the report include: Bank of America, BMO Harris, Citibank, Cross River Bank, JPMorgan Chase, Kabbage, KeyBank, M&T Bank, PayPal, PNC Bank, Truist Bank, U.S. Bank, and Wells Fargo.

Here are a few key takeaways from the report:

• Banks had clear incentives to work fast, but they also faced unprecedented logistical challenges and uncertainty during the program’s first round, which contributed to some snags in implementation. 
• Demand for loans greatly decelerated in the PPP’s second round, despite Congress’s steps to alleviate concerns around forgiveness. Continuous revision of guidelines likely had the opposite effect, in fact, in making it harder for businesses to understand requirements. Still, banks made significant headway toward approving smaller loans in the program’s second round.
• Chase and Bank of America came out on top with total approved sums as of August 8, with $28.35 billion and $25.56 billion respectively. Both volumes are significantly higher than the banks’ first round totals, in line with our expectation that some key players that lagged in round one of the PPP would catch up in round two. 
• BMO Harris, KeyBank, and M&T Bank had the highest average loan sizes among top lenders, while New Jersey-based community bank Cross River Bank and Wells Fargo had the lowest. BMO Harris did a better job than KeyBank and M&T in reducing its average loan size compared with the PPP’s first installment.
• Cross River was by far the smallest bank among top lenders, managing to approve an whopping 66% of its total assets. The community bank’s impressive performance was supported by its partnerships with fintechs such as Kabbage and QuickBooks.
• The PPP was more successful in getting funds to hard-hit states during the second installment, though it had a mixed track record of reaching the hardest-hit industry sectors. In some industries, significant need for funds was matched with higher supply, such as in healthcare. But some of the most impacted industries, like accommodation and food, didn’t get the level of relief they needed.

In full, the report:

• Combines official Small Business Administration data with additional sources, such as company filings and earnings calls, an academic paper, and analyst research, to generate insights into how different lenders fared at implementing the PPP as of its close on August 8. 
• Looks into PPP loan sizes and total fees gained by lenders, and examines total funded loans and average loan amounts for the top PPP lenders.
• Provides key takeaways from the analysis of approved loan figures by industry and geography.

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