PPP recipients seek forgiveness help; processors delay paying out funds

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Seeking forgiveness

Small businesses that received Paycheck Protection Program loans “are beginning to turn to a process some say is as complex as getting the money: figuring out whether they have to pay it back, ” the Wall Street Journal reports. “Some small-business owners have spent dozens of hours wading through the 11-page forgiveness application. Others are trying to determine how or whether legislation President Trump signed earlier this month changes the math.”

“Some lenders say the government is putting them in a difficult spot by making them responsible for determining forgiveness, and they fear being saddled with unprofitable loans.”

Meanwhile, “47 Senate Democrats are pressing the Small Business Administration to set up a streamlined application process for ‘low-dollar’ PPP loan recipients,” the Washington Post reported. “The lawmakers say the SBA’s existing 11-page loan forgiveness application takes too long to complete and may be too difficult for some ‘underserved’ small businesses such as sole proprietors, who may not have lawyers and accountants to help with the application.”

“The lawmakers asked the SBA to create a separate, streamlined form that requires minimal documentation, allowing businesses to bypass existing forms that require extensive paperwork to prove costs such as payroll and rent; to lessen the legal jeopardy faced by banks that lend to small businesses; and to set up a well-staffed help line and provide more communications resources.”

Evidence suggests some minority-owned businesses can’t access loans, and the Trump administration is under pressure to report borrower demographics, American Banker’s Neil Haggerty writes. The issue is gaining attention against the backdrop of protests over the George Floyd killing.

Looking to buy

Metro Bank, the U.K. challenger bank created and formerly run by American Vernon Hill, “is in advanced talks to buy RateSetter, one of the U.K.’s biggest peer-to-peer lenders, Sky News reported on Sunday. Peer-to-peer platforms bring together individual borrowers and lenders without a bank being involved. Sky News reported in March that RateSetter was working with bankers on a potential sale or a merger amid a funding squeeze exacerbated by the COVID-19 pandemic.”

Hill stepped down as chairman late last year following accounting problems at the bank that forced it to raise capital, angering shareholders.

Metro Bank’s new CEO Dan Frumkin wants to “boost the bank’s turnround by strengthening its lending capabilities,” the Financial Times says.

Wall Street Journal

Holding back

Payment processors like PayPal, Stripe, Square and Worldpay “are making some businesses wait additional days or weeks to access funds deposited in their accounts, citing the need to protect themselves against possible losses” when people seek refunds on items charged to credit cards.

“Those disputes, also known as chargebacks, accounted for 0.05% of credit-card transactions before the pandemic. Now, in certain categories, including travel, chargebacks are as high as 40%. From mid-March until the end of April, credit-card holders contested two to three times as many purchases as they did before the pandemic, excluding purchases flagged as fraudulent.”

Oil patch problems

“Banks are slashing credit lines to shale drillers, as an oil-price crash and wells that have failed to produce as much as predicted force a painful reassessment of companies’ assets. The cuts vary from company to company, but Moody’s Corp. and JP Morgan Chase forecast a total reduction of as much as 30% to the asset-backed loans, or tens of billions of dollars.”

“The loans aren’t large enough to pose a systemic risk to banks, whose exposure to U.S. energy companies totals around $650 billion, or about 3.5% of U.S. bank assets, according to JPMorgan Chase. But many banks could suffer sizable losses from souring shale loans and are trying to sell off their portfolios to reduce exposure, people familiar with the matter say.”

Great leap forward

American Express “said it is the first foreign payment network to be licensed to clear domestic transactions in mainland China” after it gained approval Saturday from the country’s central bank to “start operating a card-clearing network that will process transactions in yuan, giving the U.S. card company greater access to the country’s spenders.” The company “has a Chinese joint venture called Express Co. that will run the network and process local-currency payments made with Amex-branded cards. The network is expected to go live later this year.”

Blame game

A “politically connected medical supply company” is suing its bank, claiming that the lender’s “improper actions caused it to lose a $600 million order for coronavirus supplies, ruined its business, triggered death threats to its founders and ruined their reputation. Blue Flame Medical LLC contends that as it was waiting for a down payment from the state of California, an official at Chain Bridge Bank told California’s treasurer that the company might be ‘fraudulent.’ Within hours of the warning, California canceled its order for 100 million respirator masks with Blue Flame and asked the company’s bank to return the money, which it did.”

“The suit contends that the contract cancellation and the negative publicity that followed caused Blue Flame to lose other orders and damaged the company. Lawyers for the company are seeking lost profits, as well as compensation for reputational damage to the company’s founders. In a statement, Chain Bridge Bank said it ‘acted properly and fulfilled its legal and regulatory responsibilities.’”

Financial Times

Silver lining

A successful initial public offering by Quicken Loans, “the biggest mortgage lender in the U.S, could pry open the market for other non-bank lenders,” the FT says. The IPO “could come as soon as July” and “would be one of the most significant financial company listings of recent years.”

“The move comes on the heels of a liquidity crunch that caused alarm across the sector in March, and after rocketing unemployment that prompted millions of Americans to temporarily stop paying their mortgage. But the crisis has also driven down interest rates and handed the industry a bonanza of refinancing revenue and the widest margins in a decade.”

Quotable

“This is not an easy thing to figure out without help. There are too many question marks and too many errors you can make.” — Tyler Coates, vice president of sales at Ultimate Sales & Services, a Savannah, Ga.-based food broker and sales-and-marketing agency, about the difficulty of completing the paperwork to have its PPP loan forgiven.

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Paycheck Protection Program SBA Payment processing Energy industry American Express Quicken Loans
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