Friday morning, the Trump administration launched an $350 billion small business lending effort, however the program’s infrastructure, wasn’t ready for the flood of millions of people expected to seek help.
Bank of America had received 10,000 applications by 10 a.m. for the $349 billion Paycheck Protection Program that is a key element of the $2 trillion economic rescue package passed by Congress last week.
SBA administrator Jovita Carranza reported that as of late morning, 2,335 loans valued at more than $889 million already had been processed. Treasury Secretary Steve Mnuchin tweeted that the new loans totaled a whopping $875 million and almost all had come from community banks.
The country’s largest lender, JPMorgan Chase announced it did not expect to begin accepting applications for the program on Friday. Others banks said they were accepting applications but didn’t expect to process or approve them until after the Treasury Department and Small Business Administration finalize rules for the program.
Initially there was a concern that a crush of applications would overwhelm the private banking system.
“Just the scale of requests is going to cause the system to break down … just the fundamental infrastructure of some of [the banks’] Web portals won’t be able to handle it,” said Hicham Oudghiri, chief executive of Enigma Technologies, a small-business-focused data analytics and fraud detection company. Oudghiri said most of his company’s banking clients are planning to start rolling out the new loans after a week or more.
However, what small businesses around the country were not expecting were the big banks adding crazy restrictions to the application process, which business owners ultimately were faced with road blocks from their banks to the government funds the lending effort was put in place for.
The terms for the loans that small businesses are seeking under the Paycheck Protection Program are designed to be favorable to borrowers, with no payments for the first six months, ultralow interest rates, and the opportunity to have the loan completely forgiven if employees can be kept on payroll throughout the crisis.
“This is an unprecedented expansion of SBA lending that will take some time before it’s fully functioning,” said Rob Nichols, president of the American Bankers Association.
While Bank of America said it was moving quickly to meet loan requests, the policy of accepting applications first from current loan holders frustrated customers.
“Even as a small business client, I cannot apply because we do not have a lending relationship with you — we have never required debt until now,” Lindsey Johnson, the founder of Weezie Towels, said on Twitter. “This loan is make or break for our employees and it looks like if we are able to survive we will certainly need to find a new bank.”
A local Phoenix small business owner was met with the same frustrations as he proceeded through the steps of the application process with Bank of America, “This is unbelievable. I am a top platinum customer who is being punished for running a company with no debt. I am now going to have to lay employees off and stop paying full healthcare for the few I can keep on.”
US Senator Marco Rubio took to twitter Friday morning to voice his deep concerns with how the banks were managing the loan process.
— Marco Rubio (@marcorubio) April 3, 2020
“As I seem to recall, in 2008, before I got to the Senate, when the big banks almost collapsed our national economy, they came to Washington DC and asked for over $400 billion, which they got of the taxpayers money, to bail them out after they made major mistakes that crated that catastrophe,’ said Rubio.
“Well now 12 years later, the nation is facing a catastrophe and we are paying you, we are paying you to help provide government funds, not your money, government money, to small business. And I’m reading that some of the big, banks, not all, but some, are creating all sorts of crazy restrictions, he continued.”
Rubio pleaded with the banks “not to be a bunch of jerks.” When the banks needed the government’s help, they received it, now the country needs the help of the banks and it is time to do their part, after all it is the taxpayers money, not the banks money.
If you are a small business who has been impacted by the bank loan process, email us your story at: [email protected].