Press Release: Customers Bank used OakNorth to Support America’s Small and Medium-Sized Businesses

Customers Bank increases its PPP commitment by 2.5x to $500m, using OakNorth to help support America’s small and medium-sized businesses

NEW YORK, April 2020

Customers Bank (NYSE:CUBI) has processed loan applications totaling more than $200 million to help save American businesses and is expanding its capacity to process loans under the federal Paycheck Protection Program (PPP).

When the national disaster was announced on March 13, Customers Bank pledged to put $200 million to work restoring the American economy.  In just the past four days, the bank met that goal. 

PPP is chief among the tools used by the Bank’s SBA Government Guaranteed Lending and Small Business teams to get capital flowing in the economy.  In just one week, the bank has accepted 500 applications, processing 300 of them so far for submittal to the Small Business Administration.  These PPP loans make up the lion’s share of disaster lending to date.

“We are proud to be playing a role in the recovery of the American economy,” said Jay Sidhu, Executive Chairman of Customers Bank.  “Our team members have been working around the clock to get these loan applications processed.  We know small business needs help and we will deliver for them using OakNorth’s solution to support with origination, as well as the entire forgiveness journey.”

PPP is the hallmark of the Coronavirus Aid, Relief, and Economic Security (CARES) Act adopted by Congress and signed into law by President Trump on Friday, March 27 with the express purpose of helping Americans and the organizations that employ them weather the COVID-19 pandemic. 

In the ensuing weeks, demand for the loans has been overwhelming creating capacity issues for many banks.  Customers Bank Chief Operating Officer Sam Sidhu worked to apply technology to open bottlenecks.  “We are pleased to be partnering with British fintech OakNorth to apply advanced software strategies and algorithms to create a smooth online application process that uses big data to help us speed underwriting while reducing risk,” said Sam Sidhu.  “OakNorth was able to get the solution up and running within 72 hours from our first conversation, so we will have an integrated online application system deployed by Monday.”

Customers Bank is one of the top regional banks for SBA government guaranteed lending and is leveraging that expertise to serve clients across the USA, reported President & CEO Richard A. Ehst. “We want businesses throughout the nation to know we are available to help them navigate the complexities of the SBA loan process.”

The PPP provides financial assistance in the form of a “loan” of up to $10 million, but large portions of the “loans” will be forgiven if payroll is maintained during the crisis or restored by June 30, 2020. 

Eligible businesses can apply for an amount up to 250% of average monthly payroll, subject to some limitations.

The loan funding can be used to meet payroll, buy health benefits, pay rent and utilities, or pay the interest on a mortgage or qualifying debt. 

“PPP is very attractive, and every American business should use these loans to keep their team members working and with health benefits,” said Jay Sidhu. 

PPP is broadly inclusive.  Applicants can be C-corps, S-corps, Limited Liability Company, Partnerships, Limited Liability Partnerships, Sole Proprietorships, or Independent Contractors.  Non-profit organizations are eligible.

The most important eligibility criterion is that the applicant has fewer than 500 total employees. Special consideration for the hard-hit accommodations and food service industries. 

According to SBA guidance, no collateral or personal guarantees required.  The forgiven loan amount will not be considered as income and will not be taxed.

To earn forgiveness, a borrower must be able to document that funds were used appropriately.  According to guidance from the SBA and US Treasury, funds used to meet payroll and buy benefits are likely to be entirely forgiven, but forgiveness on funds used for rent, utility or debt is likely to be capped at 25% of the total loan.

There are no loan payments for six months.  The unforgiven loan amount is amortized over the remaining 18 months at 1.0% interest.  The borrower does not pay a loan origination fee.

“Our software solution coupled with our topflight and highly experienced small business lenders will make the difference,” commented Ehst.  “We want to complete at least 500 more PPP loans and get Americans back to work.” 

Customers Bank and OakNorth announced a technology partnership earlier this week:  more.

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