SBA struggles to meet demand for relief loans
Old computer system and too few employees are preventing Small Business Administration (SBA) from meeting high demand for coronavirus relief loans, says report in the New York Times, Tuesday, April 7.
The $ 349 billion paycheck protection program for small businesses was rolled out on Friday April 3 to help people stay afloat in the wake of the global coronavirus. Daily loan demand exceeds SBA processes in a typical year.
So far, $ 50 billion out of 178,000 loans have been approved according to Larry Kudlow, director of the National Economic Council. Bankers and businesses, however, said very little money had been dispersed.
“The expectation that this $ 2 trillion package goes through Congress and the money flows three days later has never been a realistic expectation,” said Patrick Ryan, CEO of First Bank, a New Jersey lender. “But I understand why people are frustrated.”
Erik Anderson, co-owner of a Midwestern barber shop chain, Scissors and Scotch, said he and his partners had been informed by their Union Bank & Trust banker that they had been approved for the loan, but that documents more were needed to proceed.
“It was a little awkward,” Anderson said, noting that they still don’t know when they’ll see the money.
Bankers say the sluggishness of the SBA’s computer system is the main cause of the delays. Lenders are struggling to get claims through the SBA’s online system, which went down completely on Monday (April 6). It also takes hours to reach SBA officials for help.
In addition, community banks are almost cash-strapped. The Federal Reserve announced earlier this week that a new program was in the works to make it easier to buy loans from banks, but no information has yet been released.
New Jersey attorney Scott Salmon has helped 75 small businesses apply for PPP loans, but fewer than 10 have been made aware of the approvals and none have received any money.
The PPP is designed offer federally guaranteed loans to SMEs with up to 500 employees. These loans are repayable if they are used primarily for payroll for eight weeks.