How Lenders Can Prepare for the CARES Act
The Coronavirus Aid, Relefic, Economic Security Act (CARES) signed into law by the current President contains notable relief for small businesses affected by the national emergency declaration of COVID-19. The most important items of relief for small businesses in the CARES act is the nearly $350 billion in small business administration (SBA) loan guarantees, subsidies, and loan programs, geared at keeping small businesses afloat and assist them in sustaining their workforces.
|Status||Paycheck Protection Program||Economic Injury Disaster Loan|
|Eligibility||Businesses that were operational as of February 15, 2020, and have less than 500 employees or businesses with multiple locations, but less than 500 employees in one single location.||Businesses located in a disaster declared or a contiguous county.|
|Loan Limit||Loans can be up to 2.5 times average monthly payroll costs, not to exceed $10 Million.||Up to $2 million|
|Your banking provider.
No payments for the first 6 months and a total 2-year term.
|Only by the Small Business Administration
Up to 30 years
|Rates||Fixed 0.5% APR||3.75% APR|
|Loan Forgiveness||Up to 100%, if approved1||Not applicable|
Section 1101 of the CARES Act creates a new loan program under Section 7(a) of the Small Business Act. Eligible borrowers can receive a PPP loan of up to $10 million to fund payroll costs, mortgage payments, rent payments, and utility payments. Banks will have an important role to play In order to administer the CARES Act Paycheck Protection Loan Program properly.
Digitize Your Processes
The U.S. Small Business Administration will cover the loans and grants to businesses that were impacted by the coronavirus-imposed shutdown, but the local banks will be the first point of contact in the process. Banks will be in charge of submitting applications to SBA on behalf of their clients using electronic loan processing (e-Tran).
This begs to question if banks are up for the upcoming wave of applicants and if the SBA system can handle it. Either way, if banks do not adopt technology to efficiently process these applications and streamline disclosures and documents for these types of loans, banks will quickly become overwhelmed. This is where a business process management platform can help ease the upcoming wave of applicants by digitizing and automating approvals and having the SBA system on the same platform.
Banks need to find a BPM that will allow for online applications to be completed with automated eligibility, loan calculation, disclosures, and document uploads. Additionally, there needs to be real-time back-office tracking and approval workflows that are integrated with e-Tran to provide full automation for SBA loans.
For example, traditionally, a loan application could take anywhere from a day to a few weeks to process, depending on the lender. Yet, with a proper workflow in place, it can just take a few minutes as seen in the video below:
This particular process used third-party tools such as Amazon Textract and UiPath so a loan application workflow can scan, interpret, and effectively route a process and provision a bot accordingly. This type of process provides solid data security and authentication measures that help financial organizations obtain regulatory compliances while providing a smooth customer experience. This type of workflow is perfect for streamlining loan application requests for the CARES Act.
Banks need to ensure that their business process management platform can:
- Offer easy web forms on your website in line with your bank’s branding
- Automate rules so that loan requests can be processed quickly
- Implement approvals on requests so decisions on loans can be expedited
- Make sure you maintain a full audit trail for all requests so you’re audit-ready
- Leverage real-time SLAs so you can track and optimize your loan processing efficiency
- Connect to the SBA backend database for automated data population
- Create downstream workflows to manage loans once they have been disbursed
Banks that don’t digitize their workflows and choose not to support the CARES Act loans will surely frustrate their customers and likely see business banking relationships change hands. Digitization provides direct benefits to the customer experience through improved digital processes. As banks adapt to meet the upcoming demand for CARES Act loans, they can achieve efficiencies from digitization and automation throughout the entire customer journey.