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re: SBA and PPP
Posted on 4/2/20 at 3:12 pm to Im4datigers
Posted on 4/2/20 at 3:12 pm to Im4datigers
quote:
5% sounds like a lot of money for no risk, but we do have overhead to pay you know. Plus there will be a lot of calories spent on doing this both on the front end and the back end with forgiveness.
Yeah, that's what I was curious about.
1
Posted on 4/2/20 at 4:26 pm to LSUFanHouston
Problem for banks is three folds based on one determination.
Determination: what is considered wages (the loan amount)and what document does the bank use to verify wages? If this point does not get settle then:
1. Banks are worried if they get the loan amount wrong then SBA won’t honor 100% guarantee. These loans are not collateralized or personally guaranteed by borrower. No SBA promise and a default the the bank takes the 100% hit to earnings and capital.
2. Banks are worried if they get the loan amount wrong the SBA will not pay the fee. No fee means the bank is doing something at a loss. That is a bad business model.
3. Banks are worried if they get the loan amount wrong the SBA won’t forgive any amount of the loan as advertised. Banks will get blamed and fake reputation hit since they determine the loan amount without guidance and they have to computer and validate the terms of the forgiveness.
Determination: what is considered wages (the loan amount)and what document does the bank use to verify wages? If this point does not get settle then:
1. Banks are worried if they get the loan amount wrong then SBA won’t honor 100% guarantee. These loans are not collateralized or personally guaranteed by borrower. No SBA promise and a default the the bank takes the 100% hit to earnings and capital.
2. Banks are worried if they get the loan amount wrong the SBA will not pay the fee. No fee means the bank is doing something at a loss. That is a bad business model.
3. Banks are worried if they get the loan amount wrong the SBA won’t forgive any amount of the loan as advertised. Banks will get blamed and fake reputation hit since they determine the loan amount without guidance and they have to computer and validate the terms of the forgiveness.
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