Fintech Insights

The CARES Act - Lessons learned and what lies ahead

Rob Lee | EVP of Core and Channels

August 10, 2020

When the Coronavirus Aid, Relief, and Economic Security (CARES) Act was originally signed into law back in March, we were entering a world of uncertainty. COVID-19 was here, and it was hard to imagine the impact the pandemic would have on the economy. Small and Medium-sized businesses were especially hit hard as mandatory shutdowns shuttered all but essential operations.

As we enter the third quarter of 2020, we are still working through a fair degree of uncertainty. In regions across the U.S., businesses and municipalities are stepping up prevention measures due to secondary increases in cases. This signals that the economic impact of the pandemic is still evolving, so let's reflect on what we learned from the initial roll out of the CARES Act, and what we might expect going forward.

Lessons learned

When it was originally signed into law, the CARES Act was the largest economic stimulus package in U.S. history. Originally it offered $208 billion in loans to major industries and $300 billion in Small Business Administration loans, before growing to more than $2 trillion in total relief. Maybe most importantly, it was rolled out expeditiously to provide immediate impact. In response, FIS was swift to evaluate how their real-time lending platform, with established connectivity to eTran, (US Small Business Administration loan servicing portal) could be instrumental to help their clients play a pivotal role in offering PPP loans. FIS was confident they could provide a streamlined application process for their banks looking to support their small business clients in their greatest time of need.

However, the need for fast deployment resulted in a lack of clear and consistent guidance from the Small Business program administration during the rollout, including:

  • Lack of guidance on who could qualify for a Payroll Protection Plan (PPP) loans
  • Lack of guidance on documentation that was required to apply for a PPP loan
  • Lack of guidance on the forgiveness process

No doubt, it’s hard to roll out such a massive and comprehensive program like the CARES Act in just a few weeks’ time without bumps -- regardless of how effective it was. But not all was negative by any means. Updates to the program, including increased flexibility for the use of the funds and extending the application period to the end of August was an effective response by Congress to the evolving need of the small businesses hard hit by the pandemic. Also, the program appears to have helped carry over businesses and their employees through the initial pandemic “shut-down” periods. FIS was able to help distribute nearly $16B in relief funds to more than 183,000 small businesses—protecting the paychecks of nearly 2.3M American workers.

What’s next

Depending on how the pandemic evolves over the coming quarter, there will likely be the need for additional PPP loans that cover future need periods to retain employees. These funds may end up being restricted to fewer types of businesses, especially those that must remain closed by law. This includes bars, restaurants, movie theaters, where it’s more difficult to contain community spread because of the large number of people together indoors.

The funds will likely be split by the government again between large, community and minority-owned depository institutions. The terms of this new wave of PPP loans are expected to be similar to the existing terms.

To help banks help SMBs, FIS continues to offer Real-Time Lending, in partnership with Numerated, to help you manage these small business loans. FIS Real-Time Lending is a solution that features one platform for all PPP loans, including pre-filled forgiveness requests and digital doc uploading, routing and e-signing. This allows borrowers to apply online in minutes and receive instant approval and funding within hours, keeping them operational as quickly as possible.

FIS is working tirelessly to deliver both continuity and solutions that will help your business adapt to the strain brought on by the pandemic. Things may remain uncertain, but as your partner, we remain committed to helping you navigate these extraordinary times.