The federal government’s relief program for small businesses was off to a slow start Friday, with only some businesses able to apply and several banks either not accepting applications or seeing long waits to make approvals.
Millions of small businesses are expected to apply for these desperately needed rescue loans from the $349 billion Paycheck Protection Program, which was put in place to help them retain workers and pay bills during the coronavirus pandemic.
Roughly 5,200 loans valued at $1.8 billion had been processed as of Friday afternoon, said Jovita Carranza, U.S. Small Business Administration administrator.
The program is being overseen by the SBA but banks are handling the application process. Some large lenders such as Wells Fargo, Huntington Bank and Bank of America were ready to go at the program’s outset.
BoA said its gotten 28,000 applications so far. But JPMorgan Chase only started accepting applications Friday afternoon after saying earlier that it wouldn’t.
Even those banks accepting applications were limited in whom they could accept. BoA said the loans were available to customers who had business deposit accounts and business loans with the bank.
The program is part of the $2 trillion relief package signed into law last week, which was billed as a way to help local businesses that often form the fabric of communities stay afloat.
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The program will give businesses low-interest loans of about 2.5 times their average monthly payroll. The loans will be fully or partially forgiven if businesses show that the money was used to retain or rehire employees and pay some overhead expenses through June 30.
“For these small businesses, it is a matter of life and death,” said former Treasury Secretary Jacob Lew, who served in the Obama administration.
He added that if the businesses can’t rehire workers, it will impede the effort to get a recovery started once the virus is contained.
Going into the program’s launch Friday, the banking industry had been trying to temper expectations about how many businesses will get the cash they need on Friday. Banks large and small will have to process these loans as quickly as possible to get their customers a slice of the program.
The banks have moved employees into new departments — a logistical challenge given many employees are working remotely — just to potentially keep up with the flood of applications.
In addition, thousands of their employees are either sick or quarantined because of the virus.
Although Treasury Secretary Steven Mnuchin said money could be disbursed as early as Friday, at least some banks seemed to be hedging any bets on being able to deliver cash that quickly. When Jordan Gurrieri submitted his application to Bank of America, the receipt he got said, “we will process your application as soon as possible.”
Gurrieri, co-founder of New York-based app developer Blue Label Labs, called the process “rough.” It took him more than 30 minutes to submit his application to Bank of America, more than three times what some other owners have reported.
While Congress could approve more money later on, the program as it stands is expected to run out quickly. That could mean applicants who have the financial and legal expertise of a larger organization might be able to maximize their benefits — not leaving much for smaller businesses, especially those who wait or have problems applying.
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Congress made the program as wide as possible. An expansive definition of “small business” in the law means that it will be open to much more than just Main Street shops as lenders start processing applications.
Bankers recommend applying for the loans through the bank they already have accounts with to speed along the process as quickly as possible.
Independent contractors and the self-employed are not eligible to apply until April 10 under guidance from the Treasury Department. By then, banks could be overwhelmed with applications.
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