Small Business Administration loan schedule unclear for businesses affected by coronavirus
Employers whose survival depends on emergency loans under the new paycheck protection program are flooding banks with requests and have no time limit to get the money – a source told the Chicago Sun on Tuesday -Times that the Small Business Administration has yet to issue guidelines certain banks need to make the loans.
Banks ready to pay billions of dollars are nervous because on Tuesday, the source said, lenders were only getting “assurances on a conference call (which) are not enough to start making billions of dollars in. ready “.
The main feature of the PPP program – the conversion of loans into cash grants – depends on the banks obtaining the SBA documents needed by all parties to complete the deal. Banks need a written guarantee from the federal government that they will get their money back.
“Without the official language of the note or the permissions, banks and small business owners run the risk that loans will not be eligible for forgiveness or collateral under the PPP,” the source said.
The source said the electronic information system, which had broken down earlier, was operating on Tuesday, albeit very slowly, and banks said they were repeatedly kicked out while processing individual applications.
The desperately needed financial lifeline was launched on Friday, when banks began to accept the demands.
At a White House conference Tuesday with the heads of the nation’s largest banks, Bank of America CEO Brian Moynihan told President Donald Trump: “We’re down to about 250,000 applicants in our company. We start to process them until the SBA.
However, there is a slowdown because, he said, “it will take an automated flow that the SBA is working hard to put in place.”
Trump, during his COVID-19 briefing on Monday, bragged about the success of the small business bailout program launched on Friday. This is not what I heard after listening to the questions and answers at a briefing Monday from the Illinois District Director of the Small Business Administration, Robert Steiner, during a webinar hosted by the representative. Brad Schneider, D-Ill., Member of the House Small Business Committee.
Steiner, in response to a question, was unable to provide an estimate of how long it would take to get the money after filing a claim with a bank, which must then be approved by the SBA. I’m not harassing him. Steiner tried to be helpful. He didn’t want to give out misleading information or raise unrealistic expectations.
Schneider, who represents the Northern Suburbs 10th Congressional District, told 400 people attending the webinar that the kickoff had “not been easy.”
The $ 349 billion “Paycheck Protection Program” – known as PPP – is part of the $ 2.2 trillion package of the CARES (Coronavirus, Aid, Relief and Economic Security) law. The PPP Rescue is designed to get money to small businesses and nonprofits as quickly as possible. In addition to paying wages, part of the PPP loan can be used to pay the employer’s share of group health care benefits; rent and utility payments; and interest on other loans and debts.
If you use the money as planned, you, the employer, will have that loan converted into a grant. It means you get the money and don’t have to pay it back. No wonder the banks were hit by a stampede of candidates on Friday.
On Monday, Trump, when asked about the haphazard start of the PPP, said: “A few small issues, some minor issues, which have already been fixed. He went on to reprimand a reporter who asked a follow-up question about the launch of the loan program.
No matter what you think of Trump as we go through this disaster, his uncontrollable bluster and his urge to pronounce everything he does as perfect is not helpful as the economy is melting due to the coronavirus pandemic.
On Saturday, Trump, when asked about the PPP rollout, said: “It’s been flawless – it’s been flawless, so far. Far beyond our expectations. … I haven’t even heard of a glitch. They have made billions of dollars in loans to small businesses.
The launch was not without fail. There were speed bumps. Part of the reason was the well-intentioned rush to launch this program.
After the passage of the CARES Act on March 27, there were still rules written by the SBA on exactly how to deliver the ambitious program.
The banks weren’t given any directives – and they’re only interim – from the SBA until a banking source told me Thursday night giving them just a few hours to finalize their plans.
Another source in the banking industry told me that sometimes on Monday the electronic transmission system broke and the backup system was not ready to go. And when the system works, there have been major technical issues, including the management of security measures.
In addition, the SBA has not sent the banks the promised language on what to put in the promissory note on disbursement of funds. This is a big deal since the first money disbursed for a P3 loan comes from the lender, not the federal government.
Just to give you an idea of the demand, Bank of America, as of Friday, received 250,000 inquiries from people seeking a total of $ 36 billion on Tuesday.
There is also the fine print in the rules. Employers must have a relationship with a bank in order to deposit immediately. For Chase, all it meant was a checking account. On Friday, B of A also wanted some sort of loan relationship, even though it was a credit card. On Saturday, this requirement was gone.
Anne Pace, Executive Director of Communications for Chase, said, “We have been accepting applications since Friday. If a customer has submitted a request, they are in the queue and we will get back to you as soon as possible.
Chase has 335 branches in Illinois, part of which is in Northwest Indiana.
Nick Simpson, spokesperson for the Consumer Bankers Association, said the banks “have been working tirelessly to get this new program launched fully for small businesses and as we continue to work with the SBA to receive advice on how to put it right. required additional “.