May 11, 2020

Sometimes You Must Do What is Required

By: Steve Stapp, Round Rock Chamber Board of Directors

First, I hope this finds all of you and your families healthy and in good spirits during this challenging time we are living through. We will make it through this. This experience will make us stronger and more prepared to face new challenges in the future.

Community can mean many things to different people. Round Rock is a great community, filled with great people, all working for the good of each other. In the dictionary, one of the definitions of community is “a feeling of fellowship with others, as a result of sharing common attitudes, interests, and goals”. This defines Round Rock to me.

We are a Community Bank and as such we work to build relationships and help our customers and our community at every opportunity. We do this in many ways. We take deposits and use those to make loans in our communities. We look for opportunities to make a difference. Our latest opportunity came in the form of the SBA Payroll Protection Program (PPP). This program is intended to help businesses keep their workforce employed during the COVID-19 crisis.

When the program was first introduced in late March and early April of this year, we did not know how we would be able to participate in it. The primary reason we were unsure was because we were not given any official guidance for how the program was to be run. There were no applications to apply for the loans, no criteria about who would qualify, no loan documents to use and on top of all of that we were not sure how we could process the volume of requests. The loans were to be made without collateral, without personal guarantees and there were to be no payments due for the first six months of the loan. In addition, the interest rate is 1%. All these things run contrary to what bankers do. The information about what it took to qualify was very limited There was a great deal of conversation about this at the bank with our staff and our Board of Directors.

Even with all the unknowns, our company decided the right thing to do was to make as many of these loans as we could to try to help as many people as we could. We did this. We were able to help over 470 businesses in our communities. Our people worked for twenty-two days straight. This included three consecutive weekends. The days were long, and the work was difficult. I am very proud of our staff and what they were able to accomplish.

The most difficult part of all of this was the fact that the guidance for the program kept changing and continues to change. It is very difficult to participate in a program and be able to help small businesses when you do not know what the rules are. The businesses would ask for help and advice that we could not give them because we did not have the answers. We finally decided to learn what we could, create a plan of action and move forward.

In defense of the SBA program, it is an almost impossible task to create something this large and complicated in less than ten days when any new program that the SBA creates takes at least eighteen months to establish. In ten days, the program was created, limited guidance was issued, an online application process was established, and loans were being submitted for approval. You must remember that Phase I of this is a 349-Billion-dollar effort that was put into place in about ten days. There is no wonder that there were issues with the details of how it all would work.

We are also participating in Phase II of the PPP lending process and we will continue to process loans until the funding is exhausted.

The next step of this program for us and the small businesses is the forgiveness of the loans. Under the guidance, at the end of seven weeks from the date the loans were funded, the borrower can apply to have the loan balance forgiven. There are questions that remain regarding how all of this will work but basically, if the borrower used 75% or more of the funds from the loan to pay their employees, they should qualify for forgiveness of the debt. There are several criteria that need to be met and documentation that must be provided to complete this part of the process. There are also many unanswered questions.

We are in the process of putting together a plan to use to help our borrowers through this phase of the program. The plan includes the use of a new software program to help streamline the forgiveness process. I am sure there will be more challenges along the way, and we will deal with them.

I have given you a very simplified look at this program and there are many more details and requirements that have been put in place to govern this process and I believe there will be many more before we complete it. As I mentioned earlier, the hard part is all the ongoing changes.

At the end of the day I do believe that the PPP loans have helped many small businesses during the COVID-19 shutdown. There are some that could not have made it through this without the PPP money. There are still many challenges ahead for all of us and this is not the answer to all the issues our community and its businesses will have to deal with. It is just a piece of the puzzle that we are trying to put together as we work to ease the financial burden on our businesses, their employees, and our communities.

When we were trying to create a strategy to implement this program there was a lot of questions and concerns from all of us. We did not have enough staff. We did not have enough funding for these loans. We did not know what application to use or what the actual loan document would look like. There were many more questions than we had answers for. We wondered if we were good enough to make it all work. At this point, we relied on a comment by Winston S. Churchill former Prime Minister of Great Britain during World War II. Mr. Churchill said: “Sometimes doing your best is not good enough. Sometimes you must do what is required”. This is what we did.

The most important part of all of this is the health and safety of all our families. The financial impact of all of this is very significant and wide ranging but it is very small and unimportant compared to the lives that have been affected by this terrible disease.

Please stay safe.

Steve Stapp
R Bank

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