WASHINGTON: The lifeline to help small businesses weather the coronavirus economic shutdown had a chaotic and often frustrating opening – and it might not be enough.
Last Friday was the first day that US small businesses could start applying for loans under the US$349bil Paycheck Protection Program, a central part of the US$2 trillion stimulus package signed into law on March 27.
But while Treasury secretary Steven Mnuchin was live-tweeting the torrid pace at which billions of dollars of loans were dispensed, banks struggled to respond to the flood of requests, and small companies worried that the first-come-first-serve funds might run out before their applications are approved.The Trump administration didn’t release new rules until late Thursday, hours before the programme launched, and some banks, including Wells Fargo & Co, said they weren’t ready to accept applications.
Small business owners reported frustration trying to get answers from their banks and submit the required documents.
“Yesterday was a lot of confusion – you had the Treasury secretary tweeting out how well it was going, but what I was seeing was that most banks couldn’t get on the system, ” David Steen, a top executive at Bridge Community Bank in Iowa, said in a phone interview.
Mnuchin celebrated the more than 17,000 loans valued at over US$5.4bil processed on the programme’s first day, with 1,100 local lenders involved. He also promised that more lenders would be ready to accept applications next week.
Trump on Saturday tweeted that he “will immediately ask Congress for more money to support small business” if the funds run out. Larry Kudlow, the White House’s top economic adviser, said that could come through “supplemental assistance.”
House Speaker Nancy Pelosi, a Democrat, also acknowledged on Friday that Congress might have to direct more funds to the virus-relief programmes already signed into law.With the US payrolls report released Friday shattering records – even without capturing the full extent of jobs lost due to the coronavirus lockdown – members of the Trump administration and Congress recognised the urgent need for more aid.
“We needed to make sure we put money in to the pockets of small business quickly – this was going to do no good if we waited three or four months, ” Mnuchin said late Friday on Fox Business Network.
He has said that his team has worked until 4 am on some days, and headed back to the office within three hours, to launch the brand new loan facility within one week of Trump signing it into law.
Banks and other lenders reported spotty success with the SBA’s loan portal, called E-Tran, on Friday.
Overall, the several billion dollars in loans that went through was evidence the portal worked, at least for some, said Julie Huston, chairwoman of the National Association of Government Guaranteed Lenders.
However, other banks witnessed the portal crash repeatedly and were locked out of the system, said Paul Merski, an executive vice-president at the Independent Community Bankers of America.
That made the process on Friday “beyond stressful and disappointing for community banks, Rebeca Romero Rainey, head of the ICBA said in a statement.
Banks that haven’t done SBA loans previously – accounting for 60% of lenders – are at a particular disadvantage because they have to essentially set up an account with the agency. The fear is that big banks with established SBA units may eat up the lion’s share of government funds, to the detriment of many rural businesses, Merski said.
Mnuchin heard about some of these frustrations Friday afternoon during a call with House Republicans, according to a source.
The Treasury chief’s main message to the group of lawmakers was: “We’re working on it, ” the person said.
Lawmakers told Mnuchin they’re worried that the US$349bil will run out too soon. Mnuchin has repeatedly said that if that happens, he’ll ask Congress for more money. — Bloomberg
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