Frank Sorrentino, the CEO of Connect One Bank, joins Yahoo Finance’s Alexis Christoforous and Brian Sozzi to discuss how small businesses are faring amid the coronavirus.
ALEXIS CHRISTOFOROUS: Today is the day that small businesses can start applying for that relief program from the government, $350 billion worth of loans that was part of the latest stimulus package.
We learned moments ago that Bank of America's small-business loan portal is actually up and running right now, making it the first major bank to begin the program. Apparently their websites were supposed to be up and running right after midnight to accept online loan applications, but JPMorgan, Chase, Citi, and Wells Fargo-- Bank of America as well-- were not up and running. We're hearing now though that BofA's small-business loan portal is, in fact, up and running.
We want to get the latest on this now from Frank Sorrentino, who is the CEO of ConnectOne Bank, a smaller bank than those others that I just mentioned. But, Frank, good to see you again. I'm curious the kind of demand your bank is seeing right now for these loans and your ability to actually process them because I would imagine you're going to get crushed.
FRANK SORRENTINO: Well, good morning, Alexis. Great to see you. And just as a news flash, ConnectOne has been taking applications since Friday.
ALEXIS CHRISTOFOROUS: Good for you.
FRANK SORRENTINO: So we may not get the same headlines as some of the large banks, but we've been processing the data collection of information beginning Friday. As of yesterday, we had full online capability to accept applications for our clients. We are just waiting for the final set of rules to be reconciled with the program itself, and we are ready to go here at ConnectOne One Bank.
Our subsidiary company Boefly, which is a marketplace lender, has over 8,000 applications queued up and over $2 billion in volume ready to go out into the marketplace. So, you know, I love all our big-bank brethren, but sometimes it's the small community bank that's got to get the job done, and that's what we're doing here at ConnectOne Bank.
ALEXIS CHRISTOFOROUS: Frank, have you gotten those guidelines? You talked about, you know, sort of getting the rules of this game now from the government. And leading up to this day, a lot of the banks were saying, you know what? It's not really clear. We don't have direction from the Treasury right now. Do you-- do you know what you need to know to move forward with the loan program right now?
FRANK SORRENTINO: So look, a week ago we got the entire bill signed by the president, passed by Congress. We made some assumptions about what we believe the program was going to be about. We tailored our process accordingly. As information started to come out of the SBA, we applied that information, including the last set of rules that were issued last night. We continue to tweak our process.
It's not much different than what was originally projected that the program would be. We've made those changes, and we're ready to go to market. As soon as the SBA begins accepting the confirmations, we'll be closing loans and getting money out to the economy.
BRIAN SOZZI: Frank, Brian Sozzi here. Switching gears slightly to cash usage-- you know, we had the Federal Reserve quarantine cash coming over from overseas markets. Are you seeing people in your bank afraid to touch and use cash?
FRANK SORRENTINO: So look, we have-- at the very outset of this panic or this situation with the coronavirus, we did see people coming into the bank, actually withdrawing cash. We didn't see a lot of it, but we saw some of it.
We actually began to discourage our clients who are in cash businesses from depositing cash, and we made certain arrangements for them to be able to transact their business in different ways. And for the most part, that's worked out well. We tried to reduce the number of times that they would come to a bank branch with cash. We do recognize it is an issue, not only for them but also for our staff, and so we we've done everything we possibly can to have a sanitize process, limit the amount of exposure, and get people to think more in terms of digital means of making payments.
ALEXIS CHRISTOFOROUS: You know, some smaller banks complain that the loans would actually create what they called unacceptable losses for lenders. So we saw the Treasury-- I thought it was yesterday-- try to make it more appealing to smaller community banks by doubling the interest rate to a whopping 1%. Frank, what are your thoughts on that? I mean, I don't think anybody went into this thinking it was going to be a money maker. That's not what this is about. But what are your thoughts on that interest rate?
FRANK SORRENTINO: Alexis, I have to tell you, I am not looking at the interest rate. It is not impacting our decision as to whether or not we should do this or not. Yes, there is a cost for our bank to produce this business. Yes, we're being paid somewhat in the fee structure. Yes, I would like to see somewhat higher interest rate because ultimately we're going to bear the brunt of any losses.
But at the end of the day, Alexis, this program is critically important for our small businesses, for their employees, for the community, and we've got to do everything we can to get this done and not worry about the economics of this transaction.
Our small businesses are suffering. Businesses are closed. Their employees are really concerned about what they're going to do not in a month from now but tomorrow and next week.
And so this program I believe was incredibly elegantly designed. It pushes funding through small businesses in order to support their employees. Small businesses can pay their staff. They can pay their rent. They can pay their mortgages. Their employees get paid so they can buy food and they can pay their rent and pay their utility bills, and there's a velocity that goes through the economy.
And for the next two months, at least our small-business owners-- there's some 30 million of them across the United States-- can breathe a sigh of relief. They can be-- they can also feel good that their employees are being paid while we figure out how we're going to wrestle with this virus situation.
ALEXIS CHRISTOFOROUS: Frank, before we let you go, just give us-- I know there are a list of criteria that a small business has to meet in order to get this loan. Can you just give us a feel for some of that criteria?
FRANK SORRENTINO: So, you know, the biggest thing is you need to be able to demonstrate your payroll-- what your payroll was for the previous 12 months. And so, you know, I would say that-- I know there's a lot of talk about whether you should go to the bank that you already bank with. There are some know-your-customer concerns or anti-money-laundering concerns or Bank Security Act Concerns. So the fastest way to get through this process is to go to the bank that you have your account with.
That doesn't mean you can't do it with another bank, but those banks will already have all those measures in place. The amount of information that you're going to have to supply to your bank in order to qualify for this loan is very limited. It's limited to payroll records and a few certifications, and I think that's it. There may be one or two other documents.
As we said before, the rules are being written by the moment and being understood, but it's a very, very application-light-, document-light-type loan.
ALEXIS CHRISTOFOROUS: All right, Frank Sorrentino, CEO of ConnectOne Bank. Good luck with the volume from the small-business community, and thanks for what you're doing.
FRANK SORRENTINO: Oh, thank you, Alexis.