by Stanley Chow, Sr Product Marketing Manager
In 2020, lawmakers passed the historic CARES Act, an unprecedented $2 trillion stimulus package designed to aid citizens experiencing economic hardship from the coronavirus pandemic. One of the provisions included in this package was the $349 billion Paycheck Protection Program (PPP), a loan program to help small businesses continue paying their workers’ wages and stay operational. Loans granted to eligible businesses could be used to cover payroll, rent, utility and other operational expenses to stay afloat amidst forced closures. The program proved to be vital for small businesses, as indicated by how quickly SBA funds dried up, which led to an additional $320 billion in new funding.
Under this program, small businesses applied for low-interest private loans directly with federally insured banks and credit unions as well as through SBA-approved private lenders. Financial institutions were also directly incentivized by the SBA in the form of lending fees, receiving up to a 5% cut of the loan total for each loan application approved.
Talks are ongoing about passing a second stimulus package, which means another round of PPP loans could be on the way. While we wait, it’s important to remember what happened the first time the program rolled out.
As the entities responsible for processing applications, lenders faced intense pressure to review loan eligibility as quickly as possible. It was reported that lending departments in banks and credit unions were quickly overwhelmed by the sheer volume of applicants, leading to a substantial backlog of applications. In the early stages of the program, some 80% of small business applicants mentioned that they were still waiting on their application eligibility, left in the dark about their application status. A portion of the slow pacing could be attributed to a variety of reasons related to applicants’ documentation required to be submitted to lenders: incomplete forms, bad scans, and manual input into systems.
To recap, here’s a sample of documents needed to establish eligibility:
- PPP Application Form
- Payroll processor records
- Payroll tax filings
- Form 1099-MISC
- Income and expenses from sole proprietorship
- Any bank records that demonstrate qualifying payroll amount
As you prepare for the next stimulus package, consider doing the following with the next influx of applications and the accompanying documentation.
Apply OCR to Documents
In the early stages of the PPP loan program, applicants were likely scrambling around rummaging for the right documents to scan and send over to their local bank or credit union. As lenders, the scanned static files make it difficult to input the applicant’s information into your loan processing systems. The consequence of this is the onerous task of manually inputting data, significantly extending overall processing times. When receiving such documents, apply Optical Character Recognition (OCR) on them, so that the information becomes machine-extractable text. Doing so enables loan departments to copy and paste or use automation tools to quickly capture relevant data onto internal systems. Additionally, applying OCR to documents renders information as searchable text, allowing lenders to quickly refer back to key information using simple keyword searches rather than manually scrolling through pages.
About 20-30% of general applications (not just PPP) for financial services arrive with wrong or missing information. Lenders anticipating another swarm of PPP loan applications know that this alarming rate will bring processing to a crawl, considering the loss of time from the back-and-forth that ensues. If you were using SBA application forms as part of your PPP loan process, then it would be prudent to digitize and apply strict logic-based rules to them. Converting static forms to fully fillable documents gives applicants the convenience of filling them out on their computers, rather than printing and filling out with a pen and paper, which is unpredictable in terms of legibility and accuracy. By applying logic-based rules to forms, you can further prevent applicant information being filled in the wrong fields (for instance, applying words in a field that required numbers). Adding rules can also ensure that each empty field is filled in as required. Optimizing a form for digital filling and logic-based rules maximizes the probability that submitted applications are fully legible, accurate and in good order, reducing back-and-forth communication between loan applicants.
Applying handwritten signatures to complete transactions is one of the oldest practices in business. But with social distance protocols, remote office, and general uncertainty about the future, providing “wet” signatures in person seems like a relic of the past. Sure, returning a scanned version of an applicant’s handwritten signature is perfectly eligible and technically considered digital, but this practice involves the time-consuming process of downloading, printing, signing, scanning, and emailing/uploading, which is cumbersome at best. Lending departments pressured to sort through high volumes of PPP loan applications can ill-afford to wait for this to complete. Electronic signatures, or eSignatures for short, can dramatically reduce the steps needed to gain consent from applicants, from days to mere minutes. The process simply requires applicants to apply an auto-generated electronic signature of their name directly onto the digital consent document. Once done, the document automatically gets sent back to the lender, instantly completing the transaction.
The most important thing for financial centers to know about eSignatures is that the technology has been deemed legally defensible in the US since 2000, provided that certain provisions are met. By implementing here)technology in the workflow, you’ll be able to reduce bottlenecks at the consent stage, ultimately leading to more loans processed. (Learn more about the legality of eSignatures
Foxit Can Prepare Lenders for Upcoming PPP
In anticipation for the next round of PPP loans, now is the time for lending staffs to arm themselves with the right tools to maximize efficiency. Foxit’s PhantomPDF is an all-in-one solution that enhances incoming and outgoing documents for speed, automation, and intelligent processing for lenders. It features an OCR engine that can apply text recognition to multiple applicant documents at once so that information can be quickly transferred to other systems for further processing. Its one-click Form Field Recognition automatically detects static fields within forms and converts them into fully fillable ones, which can be further customized with rules that prevent incorrect input. Finally, Foxit has a deep integration with DocuSign, the leading eSignature platform, minimizing the time and effort typically required to solicit applicant consent via signatures.
With the next round of PPP loans imminent, and the financial incentives associated with loan approvals, lenders have a chance to elevate their profiles as trusted financial providers which helped their community during these unprecedented and uncertain times. Foxit is here to enable financial centers reach that ultimate goal. You can find out more about Foxit solutions in financial services here.