Minutes after a $ 310 billion small business aid program opened on Monday, the online application portal crashed. And it continued to crumble throughout the day, much to the frustration of bankers across the country who were trying – and failing – to apply on behalf of desperate clients.
Some bankers were so irritated that they took to social media from the Small Business Administration, which runs the program. Rob Nichols, the CEO of the American Bankers Association, wrote on Twitter that members of the trade group were “deeply frustrated”To their inability to access the system. Until the issues are resolved, he said, “#AmericasBanks won’t be able to help more struggling small businesses. “
Pent-up demand for the funds has been intense, after the program’s initial $ 342 billion funding ran out in less than two weeks, blocking hundreds of thousands of applicants whose loans were not processed. Last week, Congress approved the additional $ 310 billion for small businesses affected by the coronavirus pandemic. Bankers expected the money to run out quickly again, and so at 10:30 a.m. Monday, when the second round opened, they were good to go.
But for the second time in a month, the relief effort, called the Paycheque Protection Program, turned into chaos, confusing lenders and borrowers. A centerpiece of the government’s $ 2 trillion economic stimulus package, the program provides small businesses – typically those with up to 500 workers – with forgivable loans of up to $ 10 million. The SBA supports loans, but clients have to go to financial institutions.
When the aid program was first launched on April 3, the Treasury Department’s goal was to get money quickly to the businesses most in need – barbershops, cafes, dry cleaners and others. But many large banks took more time to configure their systems and waited for days to accept applications, prompting an uproar from borrowers who couldn’t afford to wait. Many were also furious that hundreds of publicly traded companies, as well as wealthy clients of some major banks, had access to these funds.
Employees at TAB Bank in Ogden, Utah, have spent the last week spending sleepless nights finishing preparing loan applications for 1,100 clients. When the SBA started accepting applications on Monday morning, it started trying to submit its files. But the SBA’s computer system stalled, froze, and crashed several times. Five hours later, the bank had only processed seven loans.
“I am more than frustrated,” said Curt Queyrouze, president of the bank, who also shared his experience on Twitter. “We wanted to update all of our clients tonight on the status of their requests, but at the moment there isn’t a lot of good news to give them.”
After the money ran out in 13 days, Congress last week approved additional funding for small businesses. It has set aside $ 60 billion of that amount for loans from community development lenders, credit unions and other smaller lenders. But lenders have warned that the new money will also be wiped out quickly, adding to the desperation of small businesses, which often have thin margins and meager savings, and putting more pressure on their bankers.
On Monday morning, Richard Hunt, chief executive of the Consumer Bankers Association, a business group for banks, told CNBC: “We believe every dollar is already accounted for.”
The SBA tried to prepare for the assault. He warned lenders on Sunday that he would impose “pace” limits and only accept 350 requests per hour from each lender – a move meant to reduce technical pressure on E-Tran, its electronic loan processing system, and to ensure that the money available was distributed widely. But bankers said they were unable to approach that volume through the system on Monday.
Jill Castilla, managing director of Citizens Bank of Edmond, a small community lender in Oklahoma, had 200 applications ready to be submitted on Monday. After six hours of testing, she was only able to get three.
“We serve very small businesses, and many of them are in dire straits,” Ms. Castilla said. “We know that with each passing hour, there is more money being used that will not be available to be used for loans in our community. “
At TwitterBrad Bolton, president and CEO of Community Spirit Bank, a lender in Red Bay, Alabama, summed up his experience with two photos and a caption. The first photo was of the SBA’s E-Tran portal, while the second showed an error message stating that the site was not accessible; he captioned it “Hope and Despair in Two Pictures”. His tweet, addressed to the SBA and the Treasury, also said: “Your failure to be ready is unacceptable.”
The SBA “has had weeks to figure this out, and here we are,” Bolton said in an interview. “It’s a disaster.”
In a message sent to lenders Monday afternoon, the SBA wrote that an “unprecedented request” was slowing E-Tran’s response time. The agency said there were twice as many people trying to access the system that day as the first round of program loans. Despite the technical issues, the SBA said it processed more than 100,000 loans under the program Monday from 4,000 lenders.
These statistics alarmed Mr Bolton, who was unable to secure a single loan through the system for a six-hour period on Monday.
“Who gets their loans approved? ” he said. “They need to fix this, immediately, to give Main Street fair access to this money.”
Much like it first happened – when bankers were given technical information from the Treasury just hours before they were supposed to start lending – last-minute government directives left the banks scrambling. On Sunday, the SBA said it would allow large lenders – those with at least 15,000 claims – to each send a bulk submission file. On Monday, after complaints from small banks, he reduced the threshold to 5,000 requests. (Loans would still be allocated in order, with approvals limited to 350 per hour, per bank, the agency said.)
The SBA and the Treasury Department also said on Sunday that individual lenders would not be able to distribute more than 10 percent of total program funds (excluding money set aside for community lenders). This capped the total lending of the big banks at $ 60 billion each covering the two rounds.
Candidates said being stuck in limbo was maddening.
Janet Marinaccio, CEO of Meet Each Need With Dignity, a nonprofit that runs a food bank and other relief services in California’s San Fernando Valley, applied for a loan weeks ago through Citi to help keep the 30 employees in his organization. It was not approved until the money ran out. Ms Marinaccio was told on Friday that Citi would be submitting her candidacy early on Monday. But by the end of the afternoon, she was still waiting to find out if it had been successful.
“We really hope for a happy ending here,” she said.
Drew Benson, a spokesperson for Citi, said the bank started submitting claims to the SBA as early as Monday morning.
“Our goal is to get financing for as many small business clients as possible and we’re doing our best to achieve that,” said Mr. Benson.
Bankers acknowledged that the SBA faces a huge challenge. Last year, she processed loans totaling about $ 30 billion, less than 5% of the volume she was asked to manage for the paycheck program. But the lack of proper planning for Monday’s attack still angered them.
“It was one of the most inefficient days I have ever been on,” said Craig Street, director of loans at United Midwest Savings Bank in Columbus, Ohio. “We have people sitting in front of computers entering data over and over again to continually be out of the system and have to start over. “
Alan Rappeport contributed reporting.