The Massachusetts Bankers Association (MBA) reported varying degrees of success over their membership banks with the rollout of the federal Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EDIL) – two key parts of the federal CARES Act that look to help prop up small businesses across the nation.
The PPP was the big story going into effect by taking applications at most banks starting Friday, April 3, and the rush was certainly on for small businesses with under 500 employees to participate in the $350 billion program administered by banks and the Small Business Administration (SBA).
“The approval process and the money should start happening I think by the end of the week, at the latest, barring any unforeseen circumstances,” said Daniel Forte, president and CEO of Mass Bankers. “There was $30 billion of the $350 billion submitted and approved nationally by Sunday. From Friday to Sunday the SBA did a year’s worth of lending nationwide. That’s amazing in one respect, as that’s about what they do in one year, but it’s also a good reminder that patience is going to be required here. I think the industry feels it’s a win-win.”
Forte said none of the 135 banks in his membership had any loans approved over the first weekend, but he did say several had good experiences with the application process and successfully submitted complete applications for customers.
On Monday, April 13, Federal Treasury Secretary Steve Mnuchin said more than $200 billion had been approved over the first week of the program, and he predicted that money would be in the hands of approved businesses by the end of this week. He is also working with Congress to get an additional $250 billion in funding for the PPP to fortify the program as it has seen a flood of applicants.
“Every dollar we spend on this keeps people off unemployment and keeps business intact for when we open back up,” he said. “We don’t want these businesses to fall apart.”
The funding was predicted even sooner than the end of this week, and for most small business owners, it can’t come soon enough. Forte said the first week showed there were also hiccups and the system was a little on-the-fly and “clunky.”
First, he said, the regulations of the program weren’t submitted in final form until Thursday night, April 2, the night before the launch of the PPP, and there was also still no formal application.
A lot of the existing SBA lender banks, he said – which is about 1,000 of 5,200 banks in the state, got a jump start on the program. Many of them moved quickly to have online webinars and instructional calls for existing customers, but for those without those existing banking relationships, things moved slower.
In all, he said things would likely also move slower because many banks are not physically open, and they’re being flooded with so many applications.
“An example is one regional bank of ours had 25,000 applications on Wednesday and Thursday already and they had eight people to process them and they were all working out of their houses,” he said. “So you have to be sympathetic to that and those issues. The operative word, again, should be patience. The banks want to get moving and small business owners want to get in the queue.”
Many of the banks also reported that the portal to process applications was jammed as banks and customers tried to apply all at once Friday, April 3, and into the weekend, a problem he said likely would work its way out as time goes on.
“There were banks that started at midnight Thursday into Friday processing applications,” he said. “Many were not able to immediately put those through because the portal can only accept so many hits at a time, and things get stuck. Lenders had applications, but could not access the portal because it was jammed.”
He said if there is a second round or a tweak of the program, he can see there being a way for others to process the applications and the banks to disperse the money, having a second market liquidity platform created.
“It’s just not in the current business model of banks so be able to process this many loans in a week,” he said.
He also said many banks have already been busy working with customers, especially borrowers looking to modify their loans or mortgages. His membership has been rushing to do those things the last three weeks, adding to the workload.
“The banks have been working with customers for three weeks now,” he said. “It’s not like the PPP is the only things they’ve done. For the customers who have been impacted by business with the COVID virus…they have already been working with banks to modify their business loans or mortgages.”
In all, the programs are in great need, and Forte said the SBA is trying to pull off an amazing feat to help with the assistance of banks in every region of the country. That will happen, but it may not be instant.
“There will be hiccups,” he said. “It’s nobody’s fault. It’s not the lenders fault, the SBA’s fault, or the Administration’s fault. Everyone is trying to do what they can do within current situation. We want to be part of it, but there are going to be logjams.”
Business owners wishing to apply should review the information available at: https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businesses. Borrowers will need payroll records for the past year, Tax ID numbers, and information on each individual with more than a 20 percent ownership stake in the company.