Arkansas SBA-lending institutions, banks see rush of applications for COVID-19 relief
April 13-19, 2020
By Daily Record Staff
As the Trump administration and Congress seeks to provide relief to thousands of struggling small businesses seeking relief from impact of COVID-19, applications for loans and financial assistance on the $2.2 trillion stimulus package are already bottlenecking at banks in Central Arkansas and across the U.S.
Following President Trump’s signing of the historic Coronavirus Aid, Relief, and Economic Security (CARES) Act in March, SBA Administrator Jovita Carranza and Treasury Secretary Steven T. Mnuchin touted a robust mobilization effort by banks and other lending institutions to provide small businesses with the billions of necessary within a 15-day window encouraged by Congress.
For most small businesses in Arkansas and across the U.S., the new $349 billion Paycheck Protection Program is expected to offer much-needed relief to possibly millions of companies with 500 employees or less so they can keep their doors open and workers employed as stay-at-home orders become the norm.
“This unprecedented public-private partnership is going to assist small businesses with accessing capital quickly. Our goal is to position lenders as the single point-of-contact for small businesses – the application, loan processing, and disbursement of funds will all be administered at the community level,” SBA Administrator Jovita Carranza on March 30. “Speed is the operative word; applications for the emergency capital can begin as early as this week, with lenders using their own systems and processes to make these loans. We remain committed to supporting our nation’s more than 30 million small businesses and their employees, so that they can continue to be the fuel for our nation’s economic engine.”
U.S. Treasury Secretary Steve Mnuchin, one of the chief architects of the 880-page CARES Act, said the new stimulus package provides small business job retention loans to provide eight weeks of payroll and certain overhead to keep workers employed.
“Treasury and the (SBA) expect to have this program up and running by April 3 so that businesses can go to a participating SBA 7(a) lender, bank, or credit union, apply for a loan, and be approved on the same day,” said Mnuchin. “The loans will be forgiven as long as the funds are used to keep employees on the payroll and for certain other expenses.”
According to local SBA officials in Little Rock, the new loan program provides critical access capital to businesses without collateral requirements, personal guarantees, or SBA fees – all with a 100% guarantee from the federal government. All loan payments will be deferred for six months, and SBA will forgive the portion of the loan proceeds that are used to cover the first eight weeks of payroll costs, rent, utilities, and mortgage interest.
However, almost as soon as the SBA applications for the PPP program and the agency’s longstanding Economic Injury Disaster Loan (EIDL) program dropped on April 3, lenders and small business owners were already complaining of a backlog on the SBA’s system. With an extra $10 billion in lending muscle under the CARES Act, the SBA’s EIDL program compliments the new payroll protection initiative by giving small businesses can get up to $2 million in financial support and a $10,000 advance within 72 hours of their application, if approved.
However, that relief was not immediately available on April 6 as several local SBA-lending community banks and financial institutions in Central Arkansas were already alerting customers that applied for the PPP loan seeking COVID-19 related financial assistance of slow progress. In fact, the Independent Community Bankers Association (ICBA) sent out a letter to community banks in Arkansas and across the on Sunday that it had not yet been unable to access the SBA programs due to failed technology links and portals.
In a statement on the ICBA website, the nation’s largest trade group for Main Street America banks termed the rollout of the PPP program over the weekend a “flawed launch.” ICBA President and CEO Rebeca Romero Rainey, who leads the Washington, D.C.- trade group with 52,000 branches nationwide that make up 99% of all banks, urged the Treasury Department and SBA to update the program so every community bank can access the system.
“Nearly 48 hours after the Program went live, hundreds of lenders are still trying to get approval to access the SBA system so they can process loans,” said Rainey, whose Washington, D.C.-based trade group has partnered with the Little Rock Venture Center to sponsor the ThinkTech Accelerator for early stage financial technology (fintech) startups.
Rainey said ICBA worked tirelessly through the weekend to address the problems community banks have encountered in attempting to access the first-come-first-serve PPP program, but still had not resolve those issues as pending online applications began stacking up in virtual queues at SBA-lending institutions in Little Rock and across the country.
“In my opinion, one community bank left out is one too many,” said Rainey. “ICBA will continue working with policymakers to implement these recommendations to address the PPP’s failed technology links and portals and ensure access for community banks.”
‘Big Five’ banks offer SBA loans to business customers first as COVID-19 funds dry up
At the “Big Five” banks across the U.S., which includes J.P. Morgan Chases, Bank of America, Wells Fargo, Citigroup and Goldman Sachs, those financial institutions were also urging their businesses customers to be patience as they also began taking online SBA applications through the PPP and EIDL programs.
On Sunday, Wells Fargo said it is targeting to distribute a total of $10 billion to small business customers under the requirements of the PPP and will focus on serving two segments of its customer population: nonprofits and small businesses with fewer than 50 employees. Two days after the SBA had post the PPP application online, Wells Fargo said it had already received applications from customers expressing interest in the PPP that it will fill the company’s capacity to lend under the program.
“We are committed to helping our customers during these unprecedented and challenging times, but are restricted in our ability to serve as many customers as we would like under the PPP,” Wells Fargo CEO Charlie Scharf. “While all businesses have been impacted by this crisis, small businesses with fewer than 50 employees and nonprofits often have fewer resources. Therefore, we are focusing our efforts under the Paycheck Protection Program on these groups.”
Wells Fargo and the other street banking conglomerates that all have total assets exceeding $1 trillion were also recipients of billions of dollars in so-called Troubled Assets Relief Program (TARP) funds from the Economic Stimulus Act of 2008, which helped to bring the U.S. economy out of Great Recession. Wells Fargo, which pocketed $20 billion in TARP funds, has spent the last several years in – in a fake account scandal and other bogus fee schemes that has led to the firing of two CEOs and dozens of top executives.
Scharf, who was hired in late 2019 to get the San Francisco banking, lending and mortgage giant bank on track, said that any fees generated through Wells Fargo PPP loan program will be distributed as charitable grants to nonprofits that support small businesses.
In an online letter to its business customers, Bank of America’s Head of Small Business Sharon Miller told potential PPP applicants they must have a pre-existing business lending and business deposit relationship with the Charlotte, N.C-based banking giant as of Feb. 15, 2020. Miller also said Bank of America will only accept PPP applications through its online portal to help businesses with 500 or fewer employees with payroll, rent, utilities, healthcare costs and more.
Meanwhile, with banks across the country working through the weekend seeking to fund loans through the new SBA lending programs, Mnuchin and other top Treasury and SBA officials held an online meeting Sunday (April 5) with the powerful American Banking Association (ABA) to answer questions about their concerns amid the rush of applications for financial relief from the impact of COVID-19.
During a video teleconference with ABA board members, state bankers’ association executives and other ABA leadership bank CEOs, Mnuchin reiterated the importance of bankers’ role in delivering relief to small businesses amid the coronavirus pandemic. He also expressed his view that it will be important for members of Congress and President Trump to provide more PPP funds when the $349 billion currently allocated runs low, which many expect to happen quickly.
Construction trade group asks Trump administration COVID-19 relief amid industry shutdown nationwide
Meanwhile, construction industry officials are asking Mnuchin and SBA officials to revise its eligibility guidelines the PPP to make clear that any firm that employs 500 or fewer people to qualify, regardless of average annual sales or trade.
“Congress and the administration were clear when enacting the coronavirus relief measure that any firm employing 500 or fewer people should be eligible for the (PPP) loans,” said Stephen Sandherr, CEO of the Associated General Contractors of America. “Unfortunately, the (SBA) is needlessly delaying the loan applications of thousands of construction firms that clearly would meet the statutory threshold of 500 employers or less because the agency appears to have added a secondary qualification that is not part of the statute.”
Last week, AGCA officials said that 39% of contractors have reported that project owners have halted or canceled current construction projects amid deteriorating economic conditions due to COVIP-19 and social distancing and stay-at-home policies nationwide. Sandherr said the misstep by SBA would severely undermine the purpose of the new loan program by endangering the survival of many construction firms – the vast majority of which are family-owned businesses.
“As a result, tens of thousands of construction professionals will be forced to suffer new economic hardships because agency officials are misstating the law and subsequent eligibility guidance from the U.S. Department of the Treasury,” said the AGCA chief executive.
As the construction industry seeks relief, there are preliminary discussions in the Trump administration and Congress about another COVID-19 relief package after Congress approved its three-phase stimulus package in March.
House Democrats on April 1 rolled out an estimated $770 billion plan to build up U.S. infrastructure, launching into phase four of the congressional response to the coronavirus pandemic. President Trump has countered with an even larger infrastructure stimulus with a $2 trillion price tag equal to the CARES Act.
