Treasury Secretary Steve Mnuchin announced shortly after 7 p.m. Thursday, April 2 that the Paycheck Protection Program was live and ready to begin distributing $350 billion to go toward helping small businesses.
Mnuchin said employees of both the treasury and SBA had worked “around the clock” to make sure the program was ready for its Friday debut.
He also announced that the interest rate had been raised to 1 percent after some banks had raised concerns that they wouldn’t make enough off the loans for it to make sense serving them at all.
In addition, Americans worried about using tax returns won’t have a problem now. A website will be put up where people can submit information. If nothing else works, checks will be mailed out, Mnuchin said.
But the U.S. banks are unsure they are ready for the task ahead.
Namely, the banks — among them global institutions as well as smaller local branches — are all confused as to exactly how to deal with the program. They are awaiting guidance from the Small Business Administration and the Treasury in what Ami Kassar, CEO of loan advisory firm MultiFunding, said would likely be “a mess for weeks.”
JPMorgan Chase did not mince words in an email on Thursday, April 2: the bank — the largest in the U.S. — would likely not be ready to start distributing loans on Friday, April 3 as was previously planned.
The program is a big part of the stimulus plan signed by President Donald Trump to infuse $2 trillion into the coronavirus-ravaged economy of the U.S. The plan was for banks to begin giving out loans from the package just after midnight on April 3. However, banks were not in possession of information on how to even create web portals for the programs until late Wednesday.
Treasury Secretary Steve Mnuchin has been adamant that the program will go forward anyway.
More guidance, though, had not arrived on how to implement the loans as of the end of the day Thursday. Banks weren’t even sure they’d have enough time even if the guidance had arrived on time. Lenders want to know if they’ll be on the hook for fraudulent loans, according to sources familiar with discussions, and they want to know protocol for what to do if someone applies with inaccurate information.
One possible reason for the delay could be a disagreement over power between the SBA and the Treasury, according to Brock Blake, founder of small business loan marketplace Lendio. Blake said the organizations were fighting about “process and forms” before millions of small businesses were about to sign up for the program.
The industry has asked that anti-money-laundering rules be loosened for the program. The timing of the release could be its own problem. With it being a Friday, many people will be looking to apply before the weekend, which could flood the system.