Ask any banker: The first round of Paycheck Protection Program (PPP) wasn’t pretty. Stories abound of all-night and all-staff hand-processing of loans, but with the second round of PPP funding unfurling, bankers say they’re ready — thanks in large part to automation and technology partners.

“The first time around, we did all the Suncrest Bank PPP customers in-house by hand, longhand. We were taking the application, documentation and reviewing those, and physically inputting that into E-Tran,” said Steve Jones, chief operating officer at Suncrest Bank. “We have completely changed that for the second draw.”

For the second round of PPP, the U.S. Small Business Administration (SBA) started with community development organizations last week, and about 60,000 loan applications for more than $5 billion hit the SBA’s systems, according to a government statement Tuesday. Banks like Suncrest were approved to process PPP loans this week in an attempt to secure some of the $284 billion available this round for their small business customers. The money is part of a $900 billion emergency COVID-19 relief package.

Partnering for automation

Suncrest Bank, a $1.29 billion commercial lender based in the greater Sacramento area, partnered with Numerated, a Boston-based digital lending platform to stand up a customer database for first-round PPP forgiveness. With the second round, Suncrest extended its use of Numerated’s platform to automate PPP originations in a process that now allows customers, rather than bankers, to enter loan information online.

“We had literally probably 50% to 60% of the bank staff in round one going through this process because it was such a manual process. In round two, I’ve got a team of about four people that are processing things now, that are there to help customers,” Jones said. “That’s a much more efficient process for us as a bank which, obviously from a cost standpoint, is much more palatable for us. And then the technology allows us better reporting, better control, to get this [PPP] done.”

Numerated CEO Dan O’Malley said the company processed $34 billion in PPP loans last year by adapting its existing platform to PPP loans. Numerated’s data platform gathers, stores, cleans and validates data, which it can pull from a bank to fill in forms, thus automating much of the loan application process. Numerated, which secured $32 million over four funding rounds, also pulls data from public filings of a business to autopopulate application fields. The company’s clients range from smaller institutions with $80 million in assets to those as large as $200 billion, according to O’Malley.

Suncrest wasn’t the only lender to say the chaotic first round of PPP drove them to seek technology partners for automating the forgiveness portion of the loans.

Businesses were able to apply for forgiveness of their PPP loan if they met specific rules, such as maintaining employee and compensation levels. Those partnerships simplified the forgiveness portion and, for many banks, led to an expansion of automation for the second round of PPP funding.

PPP proved a boon for Boss Insights, a Toronto-based data aggregator founded in 2017. Boss was a member of Bank Automation News’ sister accelerator program for financial services, INV Fintech, which connected the company with Oracle to offer its PPP solution to Oracle customers. Boss Insights CEO Keren Moynihan said both vendors and the bank learned a lot of lessons during the rollout.

“The lessons of the first round of PPP were, ‘collaboration, collaboration, collaboration,’” Moynihan said. “It took the borrowers and the lenders and the technology providers and the SBA to work together to get this thing to happen.”

It was an unusual situation: This type of lending did not exist a year ago, and involved three batches of money — round one, forgiveness and round two — allocated in an “insane time frame,” Moynihan said.

Boss Insights, a PPP solution provider, uses APIs to connect with the SBA, but Moynihan said many banks used robotic processing automation (RPA) to automate and provide integration to the SBA.

“What shocked a lot of technologists in the industry is that people did not go with API, they did RPA,” said Moynihan. “We, as an industry, not just Boss Insights were confused by some of the most reputable agencies focused on that style of technology versus API connectivity.”

Gartner Research Vice President Nicole Sturgill said PPP loans were the first time many banks rolled out RPA because it allowed them quickly automate the process. While RPA is excellent at automating specific processes, it can be fragile and will “break” if anything changes, she added.

“It’s only very good at a process that doesn’t change, or data that doesn’t change,” Sturgill told Bank Automation News.

Forgiveness prompts automation

Farm Bureau Bank also opted to automate after manually processing the first round. Banks weren’t sure how long the money would last, which made it difficult to decide whether to automate, according to Chief Operations Technology Officer Mark Cromer.

“We didn’t know if it’s just going to be for a couple week period, why do we want to go to the trouble of trying to find a partner to do something when we already got a manual process in the works? Let’s just through it,” Cromer told BAN.

For FBB, which is primarily a consumer bank, the PPP loans provided a chance to “get a little heavier into the business banking side,” and build some business relationships, Cromer said. But the process proved frustrating, he added, with the SBA daily issuing and revising rules. To make matters worse, the SBA would only accept loan applications at night, which led to staff members working day and night, literally, to process the loans, in addition to performing their regular tasks.

When forgiveness rolled around, there wasn’t much enthusiasm for pulling more all-nighters, Cromer noted. That’s when the $760 million FBB partnered with white-label lending platform StreetShares to provide an interface for forgiveness that digitized the process. The Reston, Va.-based StreetShares provided the bank with a branded site that allowed customers to set up an account and electronically fill out loan forms.

For due diligence and review, FBB employees can access the platform, which automates sending the loan to the SBA for approval. Once the bank secures SBA approval, there are SBA forms and a promissory note to sign electronically. While there is not enough PPP lending to justify a fully automated process for the bank, Cromer said he learned it’s sometimes best to partner for a solution.

“I think what it does show us is that for us to try to build some of these automation platforms in-house is really kind of ridiculous when there are companies like StreetShares out there that we could use to automate business lending,” he said. “I’m sure that as our volume grows to increase and to want automation, that’s the direction we will be heading.”

Size matters

Automation isn’t always an option though, and in the case of the PPP loans during the first round, it also didn’t guarantee success.

Becky Buhr is the senior vice president of finance and retail operation at the Bank of Franklin County, a Washington, Mo.-based bank with $296.9 million in assets. Banks this size often can’t afford automation, Buhr told BAN, but with the first round of PPP loans, she reached out to community businesses frustrated by their experiences with large banks, promising to walk them through the loan process. She was able to provide the personal touch and manually process their loan requests, thus securing some new customers.

Like others, Buhr said her staff worked long nights to process PPP loans, but has the manual process “down to a science.” However, the process did help push the bank to invest in an e-signature solution, although it will come too late for the second PPP round.

“Being a small bank, a lot of technology is really expensive for some of this automation,” Buhr said. For the Missouri bank, she added it’s both difficult to move quickly and to justify the spend.

Terry Renoux, head of Jack Henry Lending, fears some community banks may opt out of the current PPP round, making it harder for local businesses to obtain loans. The Monnet, Mo.-based tech company helped approximately 400 banks and credit unions process more than 70,000 loans with a total of $6.5 billion in requests.

“It’s difficult, maneuvering through the SBA and getting all this done,” Renoux said. “It really just comes down to how do we encourage our community banks to continue to participate in PPP. I think that’s the really critical component. I don’t want to see community banks not be effective, not be serving their communities.”

To help smaller banks service more loans this time around, Jack Henry Lending partnered with Biz2Credit, a fintech lender that offers alternatives to small businesses whose community banks cannot offer or handle the loans. Those loans will now be automatically forwarded to Biz2Credit, which has $387 million in total funding, without any exchange of funds or costs to the originating financial institution. Biz2Credit is a direct lender that originates, funds, holds and services all loans they make.

Overall, Renoux said PPP has been good for business, leading to new interest from banks in further automation.

BlueVine Founder and CTO Nir Klar said he anticipates the fintech lender will pick up customers whose banks or credit unions don’t offer PPP this round. The Redwood, Calif.-based company saw nearly 600% growth in customers since round one, which Klar attributed to BlueVine’s customer service during PPP.

To prepare for round two, BlueVine invested in two automations, including AI to improve fraud detection. While it wasn’t a huge issue in the first round, fraud did create “noise” in their systems, Klar said, adding the investment allows the company to detect fraudulent identities and applications.

“We have a lot of automation around the fraud type where they’re collecting information and signals, analyzing them with really sophisticated machine learning algorithms,” Klar said.

BlueVine also integrated document analysis into the actual application, Klar said, noting the fintech leveraged AI tools to extract data from different documents, such as bank statements, tax and federal forms.

While banks and vendors both said PPP caused its fair share of headaches, many expressed pride in helping their customers and the partnerships that quickly created new loan processes.

“Sure, there have been challenges with it,” Moynihan, of Boss Insights, said. “But overall, I haven’t seen another COVID-funding model that was as impactful.”