Episode 7 Commercial Lending Through COVID - PPP And Beyond
ComplianceSeptember 10, 2020

Episode 7: Commercial lending through COVID – PPP and beyond

Banking Compliance Insights is a podcast series created to deliver insights on compliance trends and provide strategies for navigating today’s regulatory and risk environments.

Our new podcast, “Commercial Lending Through COVID – PPP and Beyond,” addresses commercial lenders’ constant state of change during the pandemic and provides guidance on how to stay on top of these rapidly evolving circumstances, including credit assessments, to ensure they fulfill their client obligations.

Our experts, Wolters Kluwer® Vice President, Banking Compliance Solutions, Samir Agarwal and Michael Fuchs, Director of Commercial Lending, discuss strategies for assessing funding requests and quickly evaluating credit risk to portfolios caused by the coronavirus. With consumers in a precarious economic state, what does this mean for commercial lenders?

Greg Corombos, News Director at Radio America  00:06
Hi, I'm Greg Corombos. Welcome to Banking Compliance Insights, a podcast series from Wolters Kluwer. This series was created to deliver insights on compliance trends and strategies for navigating today's regulatory and risk environments. Today's episode, "Commercial Lending Through COVID, PPP, and Beyond," will focus on how commercial lenders can stay on top of the rapidly changing circumstances, including credit assessments, to ensure they can fulfill obligations to customers during the pandemic. Here to lead our discussion on this subject is Wolters Kluwer Vice President of Banking Compliance Solutions, Samir Agarwal. He is joined today by Michael Fuchs, Director of Commercial Lending at Wolters Kluwer, to provide expert insights on these challenges. Samir, let me pass the conversation over to you.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  00:57
Thanks, Greg. COVID-19 has created a business atmosphere like no other. There is no denying that the commercial borrower is highly connected to the consumer on Main Street. I've invited a friend and colleague, Michael Fuchs, who has a long-standing career in the commercial lending space. He's going to help us take a look at what it means for the commercial borrower. Michael, welcome. Can we begin briefly with some information on you and what your role is with Wolters Kluwer?
 
Michael Fuchs, Director of Commercial Lending, Wolters Kluwer  01:27
Thanks, Samir. It's great to be here. I started my career working as an attorney, a commercial lending attorney, and ended up developing one of the products that we now sell at Wolters Kluwer that creates enforceable commercial loan documents. Now, we have several solutions in that space. It is the perfect time to make sure that you have a robust solution for commercial lending. If there are deficiencies in documents or collateral, workouts are your best and last chance to fix them. Our solutions are solid, ensure that loan documents are enforceable, collateral is properly granted, and liens are perfected so that you can realize on your collateral and enforce your loan documents. The work these last five months on the Paycheck Protection Program (PPP) with TSoftPlus has actually been the most meaningful work of my entire career. Our whole team at Wolters Kluwer quickly appreciates the opportunity we had to help our customers, Mainstreet Banks. We're helping them help their customers save millions of jobs, and in some cases, even a whole town. We all felt like it was our opportunity to contribute and to help the whole country, in frankly, what has become the biggest crisis of our lives.
 
Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  02:40
Wow, that is significant. The Paycheck Protection Program was rolled out and designed to provide directive incentive for small businesses to keep workers on their payroll. The implementation and rollout have been quite intense. Michael, you've been very close to the program. Can you recap the different phases of that program briefly?
 
Michael Fuchs, Director of Commercial Lending, Wolters Kluwer  03:02
Well, the PPP was enacted as part of the CARES Act in response to the coronavirus crisis. The PPPs' original $350 billion was fully allocated between April 3 and April 16, 2020. In fact, the SBA stopped accepting new applications on April 16th. There was a huge scramble in the initial round of funding. It jammed the SBA E-Tran site repeatedly during that period. Lenders that have a direct connection to E-Tran through the SBA's, API, or through a vendor program, such as the TSoftPlus Paycheck Protection Program solution, had much better success during that initial period of getting approvals through and securing funding for their borrowers. Now, between April 3 and April 16, there were 1.7 million loans made by 4,975 lenders, almost 5,000 lenders. The average loan was about $200,000, and 75 percent were for 450,000 or less. Think about what that means. Normally, in a year, the SBA does about 60,000 loans. In that basically two-week period, they did 1.7 million loans. The funds ran out pretty darn quickly. Now, on April 23, the Senate and the House passed the Paycheck Protection Program and Health Care Enhancement Act to add another and $320 billion of funding to the PPP program. It was signed by the President on April 24, and that allowed the SBA to accept applications again on April 27. Now, there was a bit of a rush to start the second phase of funding on April 22, but it slowed down considerably after a week or so. At the end of the program, on August 8, there are over five million loans made by nearly 5,500 lenders. The average loan amount was just under $101,000, and 85 percent of those were $150,000 less. During the middle of this period, on July 3, Congress enacted an extension bill that extended the original date of June 30 out to August 8. As of August 8, $525 billion had been allocated to PPP loans. So, after the initial frenzy, it became clear that it could be hard to fully use the Paycheck Protection Program loan proceeds on forgivable purposes, and businesses can only qualify for one such loan. So, in the end, demand tailed off, and there were still funds available at the end of the program.
 
Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  05:33
As I follow what you just described, it sounds like every two-to-four weeks, the SBA was making a change from April until now. That's a lot of change. That's one thing that's definitely been consistent in this whole process is change. For forgiving a PPP Loan, certain criteria need to be met. What kind of guidance or what kind of changes in guidance on how forgiveness works can you share with us now?
 
Michael Fuchs, Director of Commercial Lending, Wolters Kluwer  06:04
First of all, let me go back to another change in the law. The Paycheck Protection Program Flexibility Act of 2020 amended the Paycheck Protection Program. The House actually voted 417 to one on May 28, and the Senate passed it by unanimous voice vote on June 3. The President signed it into law on June 5. The bill changed a number of provisions related to forgiveness. Basically, there was a lot of outcry in the industry and in the media about numerous aspects in the program. A new regulation, or so-called IFR, was implemented and was published to implement the changes. Loan forgiveness was expanded from eight weeks of eligible costs to 24 weeks or December 31, 2020, whichever came first. That made it easier for some borrowers to be able to pay employees and use the proceeds as intended for payroll purposes. At least 60 percent of the loan forgiveness amount must now be used for payroll costs rather than the original 75 percent, which was a rather high hurdle for some borrowers. The Safe Harbor Provisions that loan forgiveness will not decrease if the business rehires employees, and restores wages that have been reduced, was extended from June 30 to December 31. Loan forgiveness will not decrease if the business was unable to rehire the employees that it had on February 15, and is unable to hire similarly qualified employees by December 31. These rules about the Safe Harbor were substantially relaxed, making it easier for borrowers to be able to meet the safe harbors. Given that the crisis has lasted quite a bit longer than was originally contemplated when the PPP program was first rolled out, now loan forgiveness will not decrease if the business is unable to return to its previous level of business activity due to compliance with requirements or guidance from the Department of Health and Human Services, the CDC, the Occupational Safety and Hazard Administration, and/or some state agencies between March 1 and December 31. If the business is not able to open up because it's directly related to the crisis, again, the rules are relaxed. The business will not have its forgiveness declined if it couldn't open up because of the requirements of these different agencies and law.
 
Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  08:29
That's regardless of whether they worked in the health industry or not, correct?
 
Michael Fuchs, Director of Commercial Lending, Wolters Kluwer  08:34
Yes, it's regardless. It depends. Some industries are affected more than other industries. It depends where they're located. In certain areas, restaurants have still not opened, and in other areas, they've been able to open up. I also want to note that the deferral of principal and interest payments was extended to the date that loan forgiveness is remitted to the lender, or if the borrower for some reason doesn't apply for loan forgiveness 10 months after the end of the covered period, which now can go up to 24 weeks.
 
Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  09:03
What are lenders doing to support borrowers through this process?
 
Michael Fuchs, Director of Commercial Lending, Wolters Kluwer  09:08
The SBA released guidance in piecemeal in several different ways related to forgiveness. First, SBA released its initial forgiveness application in late May, and then a few weeks later, modified it and released an easy version after a lot of public criticism about the complexity. Weeks later, the SBA released its procedural notice and FAQs about the process. Lenders have been working with borrowers to obtain the application of supporting documents for months. The rules require a lender to reach a decision within 60 days of a completed application. But completed is not defined anywhere. If a borrower completed the application when the forms were first released, the 60 days actually would be coming up and has probably passed for a few of those borrowers. To help in this regard, when we released our system for borrowers to submit, we defined it as a questionnaire rather than an application to allow some back and forth between the lender and the borrower.
That's not the complete application. It's simply a questionnaire to get started. Lenders can now submit decisions to the SBA since the procedural notice was released directly on SBA’s new forgiveness portal or through a vendor, like Wolters Kluwer’s TSoftPlus PPP Forgiveness Module, which connects to the SBA’s new API and the forgiveness portal.
 
Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  10:37
It sounds really smart and really protective to call it a questionnaire to give flexibility and choice to both borrowers and lenders. What I'm curious about is how does it relate to the action that's behind it? What are lenders really responsible for, and are they underwriting because the loan is on their books until it's approved? Is this ultimately going to be underwritten and checked with the SBA?
 
Michael Fuchs, Director of Commercial Lending, Wolters Kluwer  11:08
Underwriting is sort of a strange word to use in this context, but in a sense, they are underwriting. The lenders need to submit a decision because that's what is required. They need to submit a decision, as well as a signed forgiveness application and any supporting documents the lender chooses to submit. Now, the lender has to submit the forgiveness application. They may choose to submit some of the backup documents right away because SBA may ask for additional documents, but that's in the lenders' control. The lenders do need to notify the borrower of its decision within five days of submitting its decision. Through the API or in the portal, the decision can be approved in full, approved in part, or denied without prejudice. Now, when approved in part, the lender does have to send its own calculations showing how it differs from the borrower's application. Denied without prejudice is a tad unusual. The SBA has defined that as the decision that that lender needs to send to the SBA after the SBA informs the lender that the SBA will be conducting a loan review. Basically, the SBA has decided to do the underwriting, or the determination about whether forgiveness is appropriate and how much for that particular borrower. The lender sends a decision, either through the API or in the portal, and the decision is denied without prejudice. If the lender denies the forgiveness in full, the borrower will have 30 days to appeal to SBA. Now, after the lender submits the decision, regardless of what the decision is, the request will be managed in a queue established by SBA, and the SBA has 90 days to make its decision and pay the forgiveness amount. Each loan is going to pass through an AI tool to identify which loans will receive a more in-depth review. But our understanding is all loans will receive at least some level of manual review by SBA personnel.
 
Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  13:08
When this program started, it sounded and felt like forgiveness was going to almost be an immediate thing. Ninety days is a pretty long time. That's a quarter. You're waiting for borrowers to spend the money, which can be any time between the moment that they've received it to the end of the year and then making sure that they've spent it on the right criteria before they can submit their application for forgiveness. After that takes place and they're waiting for a decision, which could be up to three months, and all this time the banks have to keep it on their books. Is that right?
 
Michael Fuchs, Director of Commercial Lending, Wolters Kluwer  13:46
That is right, and frankly, Samir, we don't know how long it will take. It's going to depend on the volume and the resource availability at SBA. Now, we know they've hired new staff for this process. Also, because there's new staff, the new staff isn’t familiar with any SBA programs. We suspect that early submission will likely receive more scrutiny as SBA and the new staff get up to speed.
 
Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  14:12
What about this AI-type of technology that the government is employing for quality control and underwriting? Is that significant? Have they published what they're looking at, and what kind of speed uplift is expected with automation in place?
 
Michael Fuchs, Director of Commercial Lending, Wolters Kluwer  14:32
They haven't provided any details on exactly how that will work and how it affects the speed. We certainly expect that it would help it be much faster than it otherwise would be. As this rolls out, we’ll all learn together how long it's going to take. We're definitely not expecting immediate turn-times like an E-Tran approval where you submit it, and seconds later, you get an approval. I’d guess probably days, maybe even weeks, as the process evolves and the volumes stabilize. Now, the forgiveness amount is going to be paid by an ACH transfer from Treasury in the amount determined by the SBA. Once the forgiveness amount is paid, the remaining balance will start amortizing in accordance with the program rules and the promissory note terms, which can vary based on the date that the loan was made. From that point on, the lender will need to service this loan like any other SBA loan on its books. Or if it doesn't have any on its books, it will still have to comply with the SBA rules for servicing loans.
 
Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  15:30
I have a quick question about that scenario. Ultimately, even though the loans were made with a 1 percent interest rate, what we're really saying is if any part of the loan is forgiven, then the amortization and interest rate starts only after that forgiveness is paid.
 
Michael Fuchs, Director of Commercial Lending, Wolters Kluwer  15:50
Yes, for the portion that's not forgiven. The remaining balance along with interest at the rate in the promissory note will have to be repaid over the term of the note, which could be two, or even potentially five years again, depending on when the loan was made.
 
Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  16:05
Makes a lot of sense. What are the best practices that you have for lenders going through the forgiveness phase?
 
Michael Fuchs, Director of Commercial Lending, Wolters Kluwer  16:14
First of all, develop and document a consistent process to use for all your borrowers. Treat them all the same, and make sure you fully understand the workflow for the process. If possible, we recommend using an online tool to fit into the workflow for borrowers to fill out their applications. Several vendors, including Wolters Kluwer, have brought borrower-facing solutions for forgiveness applications to the market. Our solution is called the TSoftPlus PPP Forgiveness Module. Borrowers should have all the information required to fill out the application and to perform the necessary calculations. These tools should make it easier for the borrower to upload the required supporting documentation. We're very careful with our solution. To make it easy for the borrower to upload the required supporting documentation, we walk them through it. For each type of documentation required, depending on how they use the money, we have a specific uploader for them to upload those specific documents. It's a complicated process, but a good solution can make it much easier for a borrower. Now, SBA rules do require lenders to perform a good faith review of the loan forgiveness application and borrowers' certifications, the borrower's calculations, and the supporting documents. So, as a lender, you're going to have to review these documents. If you identify an error in the borrower's calculation or failure of the borrower to provide substantiation in the supporting documents, you need to work with the borrower to remedy the issue. It says that specifically in the procedural notice.
 
Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  17:52
That's a lot for a lender to be responsible for. Those lenders that have had 4,000 PLUS loans or even 2,000 PLUS loans, there's a lot of work that they're on the hook for, right?
 
Michael Fuchs, Director of Commercial Lending, Wolters Kluwer  18:05
Absolutely. Now they can rely on the certifications of the borrower. Because the requirements are for a good-faith review, lenders are going to need to review each of these applications and supporting documents and make sure on their faces, things add up and conform to the program.
 
Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  18:23
It makes a lot of sense, Michael. Any other items that you'd like to add as best practices for lenders?
 
Michael Fuchs, Director of Commercial Lending, Wolters Kluwer  18:29
Yes, I would definitely recommend starting with a small group of borrowers to test out your process prior to moving into full production mode, maybe a week or two weeks later. The SBA has asked lenders to use a methodical approach to processing submissions slowly and steadily. This will allow SBA’s processing capacity to be better managed as users engage this new system. Now, it's both related to the system as well as the SBA review process. We don't expect the kind of issues we saw with E-Tran, both because it's a new system and we don't expect everybody to be submitting applications at the same time. But nevertheless, SBA would like to guide lenders to process these methodically and steadily. There may still be some legislative changes coming in the next few weeks related to smaller PPP loans. Watch that closely as the process could change.
 
Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  19:22
Is there a possibility now of a third round of funding? There was 130+ billion leftover from the first two phases that seems to be trickling very slowly. Any updates that you can provide us on that?
 
Michael Fuchs, Director of Commercial Lending, Wolters Kluwer  19:37
Well, there is a possibility of changes, both to the forgiveness process, or possibly even the program could get extended and funded with additional appropriation. But it is subject to the normal political process in Washington. The crisis is going on longer than anybody expected, and to start with, businesses could only get one loan. There's certainly a lot of thinking out there in the community that some businesses that are severely affected by the crisis might need more than one loan. Most likely, if the program is continued, it will be much more focused on those kinds of businesses that have been affected by the pandemic with potentially more stringent controls over the program. But truthfully, we don't really know how it all shakes out. We plan here at Wolters Kluwer to support whatever changes are required in our solution to ensure that our customers can continue to support their customers during this crisis period.
 
Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  20:35
I want to take our conversation on a different path. I want to lean a little bit more on your extensive 30+ years of expertise in the commercial lending space. As you talk through our economy and what the future holds for us, what kind of economic picture or perspective do you see happening with financial institutions right now?
 
Michael Fuchs, Director of Commercial Lending, Wolters Kluwer  20:57
Let's talk a little bit about the overall economic environment this year for financial institutions. Now, I took a look at the FDIC quarterly banking profile for the end of the first quarter. We should see the second quarter any day now. We see that net operating income for FDIC-insured institutions has dropped nearly 70 percent as compared to Q1 in 2019. It's driven primarily by a large increase in credit loss reserves; net charge offs are only slightly higher right now, as all the stimulus in the CARES Act, including the PPP, appears to have worked. However, going back to reserves, banks increase their reserves for loans by 280 percent. That means they expect non-current loans, and perhaps non-performing loans, will soon be three times higher than in the pre-crisis period in Q1 of 2020.
 
Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  21:53
How does that relate to our history? In the mortgage crisis, we saw something similar to that. Is it just a learned lesson that we're now planning for?
 
Michael Fuchs, Director of Commercial Lending, Wolters Kluwer  22:02
This is a very unusual economic crisis. The reason is crystal clear, and it wasn't crystal clear the last time, and it was fast. It does mean we might come out of it quickly. It will likely require a solution for the virus first, and vaccine development is proceeding right now at record speed. A sharp upturn in non-performing loans and leases is definitely on par with the global financial crisis, and it's likely to follow in the next quarter or two. There's really no doubt right now that it’s time to pay close attention to credit. Financial institutions need to focus on credit quality and how the health crisis specifically affects each of its customers. Everybody would be wise to assume that there’s another quarter or two of economic uncertainty and make sure they fully understand how that affects each borrower specific circumstances. The Five C's of credit are really in play.
 
Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  22:59
We've been watching a lot of financial institutions move toward distance banking or implementing pandemic-driven regulatory programs. What does that state about the future? What have you seen with customers or with trends in the market?
 
Michael Fuchs, Director of Commercial Lending, Wolters Kluwer  23:15
Let's look at technology trends. First, the pandemic has disrupted a lot of it plans and projects. Remote working, the flurry of activity regarding PPP, changing customer needs through the initial wave of the pandemic, it's all resulted in changes to the timelines and scope of many IT projects. In some cases, projects have been delayed or canceled. The changing demand for credit driven by the crisis as well as new government programs like PPP, and making preparations for future challenges to credit quality, are an important factor driving these changes. The existing drive to remote closings and e-signature is greatly accelerated by the pandemic. That was happening anyway, we all knew that, but now it's on overdrive. We've seen relaxed regulations and attitudes in that area. For example, SBA had imposed extremely difficult conditions previously on the use of e-signatures prior to the crisis. But as a result of needing to close millions of PPP loans within weeks and remotely, SBA relaxed these conditions and now follows the standard U.S. E-Sign Act, at least for the PPP program. Many financial institutions appear set to be making further changes. Lots of survey data I've seen out there shows that over 60 percent of financial institutions are planning enhancements to their digital channel offerings focused on customer onboarding and origination remotely within the next two quarters. It's basically a requirement to operating effectively during a time of social distancing. It was going to happen anyway because the world has moved online, but the pandemic has certainly accelerated that because bankers and customers are remote now. Better online capability combined with more products with e-signature capability, or just what's needed right now, for effective remote operation. It fits nicely into where the industry was heading long-term anyway.
 
Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  25:24
I know for consumers, and being a consumer, the digital movement was pretty prevalent. You see it everywhere you go, in every country and every place that there are financial transactions for the consumer, they're going electronic. Heck, I barely use cash today. What I'm curious about is when it comes to commercial lending, do you see the same trend taking place?
 
Michael Fuchs, Director of Commercial Lending, Wolters Kluwer  25:46
I do, and if you think about it, Millennials are coming of age and starting to run and control businesses all over the place. In addition, everyone is used to great solutions that they use online for their personal lives. They want the same thing for their business lives. They want to be able to apply for credit, just like they can apply for a credit card right now, online. They want it to be quick and easy. The pandemic has simply accelerated what was happening anyway.
 
Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  26:16
Michael, you just said something that really resonates with me, and I think, subliminally resonates with many decision-makers out there, which is expectations. I expect what I can do personally, in my personal life, is a no-brainer in my professional life. If I can transact electronically in my personal life, I should also be able to do that in my professional life. The technologies are the same, even if the transactions a little different. You mentioned the Five C's of credit. What I'm interested in learning from you are which of the Five C's are the most crucial? What are they, and does it provide any foresight into what to expect in the lending business?
 
Michael Fuchs, Director of Commercial Lending, Wolters Kluwer  26:59
Well, it's basic credit. But now is the time to make sure you have the basics down, right? You want to make sure you look closely at the portfolio and understand the basics for each of your borrowers' focus on the Five C's. It's the perfect framework. It's the blocking and tackling of commercial credit. I might change the order a little bit for the pandemic. I'm going to focus on conditions first, which normally come last. This focuses on economic conditions and how it affects a particular business. Now, the pandemic affects all businesses differently. You need to worry most about those businesses that are most susceptible to the pandemic. You know, grocery stores are open right now and doing quite well. On the other hand, restaurants and hospitality businesses are not. How concentrated is your portfolio to susceptible industries? Do you have commercial real estate that's concentrated and leasing to businesses in susceptible industries? A good tool for this kind of analysis can help you plan and prepare for the rest of the pandemic. I'm going to put the character second. People will often put that first. How well do your borrower competence and experience matter? Have they been through hard times before? Will we figure out a way to make it work, or at least pay back the loan or most of it? People of high character figure out ways to do that, even if they have to struggle with their business? Next, let's look at capacity. It's more of the financial fundamentals. What's happening to cash flow? Are they able to pay their fixed costs? Did they use their PPP funds, and without that, what happens? You need a good tool to spread the numbers and see where they stand. Let's take a look at capital. How long can they withstand this decline in revenue? Do they have enough of a cushion for another quarter, or two, or even a year if it takes that long for a vaccine? Do you understand the risks coming up in the portfolio, as different borrowers have different abilities to withstand the crisis as it continues? And finally, we'll take a look at collateral. In the worst case, that's what's available and liquidation. It might be a hard time to evaluate collateral remotely right now. Maybe it's easier for brick and mortar for real estate. But collateral is more movable, and are easily diminished in value, like accounts receivable and right count debtors. They can disappear pretty quickly in a bad economy. Other types of intangibles can go fast, too. You want to look at your collateral and see how well it holds up in this kind of environment.
 
Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  29:32
It's pretty insightful. I like that you put the conditions upfront and character is number two. It plays quite the role of creditworthiness. How do we enhance our visibility in the creditworthiness of our borrowers?
 
Michael Fuchs, Director of Commercial Lending, Wolters Kluwer  29:49
We have a good tool with deep analysis and flexibility, which is really needed to help you get deep insight right. It can make the difference between having that deep insight into your portfolio and helping you take corrective action early to minimize losses in this kind of environment, or missing that. Our tool for spreading is actually called CASH InsightsTM for a good reason. It helps our financial institution customers gain valuable insight into their borrowers and their portfolio. If you're using Excel or a less robust system, now, it's a good time to look at the market leaders in the space. I can confidently say our tool is one of the best, and frankly, it probably is the best for this right now.
 
Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  30:33
I'm curious about your thoughts on deep analytical tools and third-party competitors to your tool. How do they combine market insights or data into a borrower's creditworthiness? Are they valuable and should they be considered?
 
Michael Fuchs, Director of Commercial Lending, Wolters Kluwer  30:52
Sure, Samir. Right now, you definitely need a deep analytical tool to dig into each borrower. And using third party information to integrate it into your risk rating framework, which is part of your credit analysis, to rate and categorize each borrower. It's a critically important thing to do. There are lots of good data sources out there that can supplement the framework for doing a risk analysis or risk rating. We definitely encourage people to bring in industry data to supplement financial analysis done in our spreading tool.
 
Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  31:26
I know you've got a crystal ball over there. What is it telling us about commercial lending?
 
Michael Fuchs, Director of Commercial Lending, Wolters Kluwer  31:31
Ahh, time for my crystal ball? Well, this too shall pass. But the world will be different, as it always is after a crisis. I'm confident the trend online, and the ability to implement digital channels for financial institutions has accelerated by years, if not decades. There's no turning back now. In just a few more years, I suspect, nearly every financial transaction will be possible through digital channels, and nothing else will be accepted. The day of going to closing and signing with wet ink is finally coming to an end.
 
Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  32:05
I couldn't agree more. Michael, it was a pleasure speaking with you today. I think we provided some excellent insight into the PPP forgiveness phases and also how to navigate commercial lending trends in this difficult time.
 
Michael Fuchs, Director of Commercial Lending, Wolters Kluwer  32:19
Thank you, Samir. I really appreciate being able to spend this time with you. I look forward to getting past this crisis, so we can continue to work with our customers and bring them the best solutions for commercial lending.
 
Greg Corombos, News Director at Radio America  32:31
That's Wolters Kluwer Vice President of Banking Compliance Solutions, Samir Agarwal, joined by Michael Fuchs, Director of Commercial Lending, Wolters Kluwer. Wolters Kluwer is the host of this podcast and a market-leading provider of advisory services and technology solutions for optimizing compliance and risk management programs. For more information and additional guidance, please visit WoltersKluwer.com or call 1-800-397-2341. Please join us for future podcasts focused on navigating emerging trends in regulatory compliance.