Tips To Prepare For PPP Forgiveness

An Oklahoma credit union encourages business owners to wait to apply for forgiveness but has tools in place to assist members who want relief now.

 
 

Top-Level Takeaways

  • In the past two-and-a-half years, Tulsa Federal Credit Union has expanded business lending from approximately 15 members with $12 million in balances to 250 with $100 million.
  • This growth does not reflect activity via the paycheck protection program, for which Tulsa FU was the top credit union lender in Oklahoma.

CU QUICK FACTS

Tulsa FCU
Data as of 06.30.20

HQ: Tulsa, OK
ASSETS: $838.6M
MEMBERS: 55,232
BRANCHES: 14
12-MO SHARE GROWTH: 6.5%
12-MO LOAN GROWTH: 0.6%
ROA: 0.16%

To combat the potential long-term deleterious effects of the coronavirus on the American economy, U.S. lawmakers passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020. The act established a $659 billion fund to provide business loans to cover staffing and other costs. 

On July 6, the Treasury Department released data about lenders as well as borrowers who participated in the Paycheck Protection Program. Callahan & Associates has published information about the number of jobs credit unions helped save through PPP lending — more than 11 million — as well as the top credit union PPP lenders by state and the top credit union PPP lenders by asset size.

Callahan also hosted a panel discussion with five credit unions that have participate in PPP lending. These cooperatives of varying sizes and geographic regions discussed how the paycheck protection program helped strengthen their business relationships and how cooperatives can support small businesses moving forward.

Now, lenders are turning their attention to the next big PPP hurdle: loan forgiveness. 

Here, Brendon Maguffee, chief lending officer for Tulsa Federal Credit Union ($838.6M, Tulsa, OK) talks about his credit union’s approach to forgiveness and offer insights from Tulsa FCU’s PPP lending experience.

Talk about the credit union’s history of offering business loans.

Brendon Maguffee, CLO, Tulsa FCU

Brendon Maguffee: The credit union wasn’t in that space prior to my arrival two-and-a-half years ago. However, when the NCUA ruling changed in January 2017 to allow credit unions to compete more closely with community banks on commercial lending, Tulsa FCU saw it as a great opportunity to start a commercial line of business. 

I was attracted to the credit union’s focus on people over profits and was able to bring my banking industry background to the table. Since then, we’ve grown from approximately 15 business members and $12 million in commercial loans to approximately 250 business members and a total of $100 million in commercial loans. This doesn’t count the new PPP members. 

Offering PPP loans was a challenge for many organizations. How did your credit union adapt quickly to serve members? 

BM: It was definitely a challenge. This was a program that impacted more than 6 million businesses nationwide and happened within a three-month span. However, we were able to facilitate a good experience for our business members and actually had larger banks referring business owners to us because they knew our team would take care of them in a timely manner. 

We’re processing the forgiveness applications as we receive them. This is something some of the banks just aren’t doing — they’re not accepting forgiveness applications even if a business owner wants to get a jump on it.

Brendon Maguffee, CLO, Tulsa FCU

Our team has expanded over the past two-and-a-half years from one individual focused on commercial lending to eight, including two commercial lenders, a credit analyst, two commercial loan specialists, a post closer, and a director of treasury and business services

I reached out to a previous colleague who is an SBA loan officer, and he walked me through E-Tran [the loan servicing portal of the U.S. Small Business Administration] so I could train all my loan officers. When the second round came out, we pounded out applications as fast as we could. We were up at 1 a.m. or 2 a.m. for multiple days. We processed 254 PPP loans, most in a two-week timeframe, with only four exceeding $150,000. Whereas I don’t envy any of us, it was our job as partners in our community to facilitate this. 

What are you doing about PPP loan forgiveness? 

BM: We’re working through the forgiveness portion now and moving forward even as it might continue to change. We just sent a tailored email to every PPP recipient that we serviced letting them know they have 10 months from their covered period and it might be advisable to wait and see if legislation on forgiveness changes. However, we want to serve our members who choose to be proactive, and we have made the forgiveness applications and instructions available on our website. We’re processing the forgiveness applications as we receive them. This is something some of the banks just aren’t doing — they’re not accepting forgiveness applications even if a business owner wants to get a jump on it.  

We have started processing our first few forgiveness applications. Based on the volume and expanded timeframe, we’re doing them directly ourselves. We also have 60 days from receiving an application to make a decision, so we can stagger them accordingly. We are still advising members that it might be beneficial to wait, but some might want to get started or just put this all behind them. Regardless, we’re pointing every member to the new, free, online PPP forgiveness tool, www.pppforgivenesstool.com. It is intuitive and allows members to print a PDF with all their supporting documentation.

How has the paycheck protection program helped Tulsa FCU build new relationships with small businesses or strengthen your existing relationships?  

BM: Probably 75% of the PPP loans we made were for non-members. The message to the community was clear: we were able to facilitate these when their FI couldn’t do it in a timely manner. It’s already a challenge to keep up, frankly, as dissatisfied bank clients move their home loans and other accounts to us after having a positive PPP experience. The increased amount of business on top of normal operating activity is not something I could have predicted, but it is positive for the membership and our employees.

What are some lessons you learned from your PPP experience that might be applicable to other credit unions as they try to serve small business members in the future? 

BM: It’s imperative to have a relationship with the SBA. That’s one of the reasons we were successful — our representative helped us navigate PPP. It’s not very cumbersome to become SBA express approved, so I recommend familiarizing yourself with that process, especially if you want to spur economic development in the community and be certified for new programs it might launch down the road.

It’s also important to have a back-up plan. We learned through PPP that CUSO or vendor partners might not always have the infrastructure needed to serve members. Credit unions must have a response if their vendor can’t facilitate a solution, even if it’s just a referral to another lender. You can often preserve the larger relationship if you’re honest and give them a warm hand-off to someone else who can serve their immediate needs in a timely manner. 

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