An old computer system and too few employees are making it hard for the Small Business Administration (SBA) to meet the high demand for coronavirus relief loans, according to a report in the New York Times on Tuesday (April 7).
The $349 billion Paycheck Protection Program for small businesses rolled out on Friday (April 3) to help keep people afloat in the wake of the worldwide coronavirus. The daily demand for loans is more than the SBA processes in a typical year.
So far, $50 billion across 178,000 loans have been approved according to Larry Kudlow, the director of the National Economic Council. Bankers and businesses, however, said very little money has been dispersed.
“The expectation that this $2 trillion package would go through Congress and that the money would be flowing three days later, that was never a realistic expectation,” said Patrick Ryan, the chief executive of First Bank, a New Jersey lender. “But I get why people are frustrated.”
Erik Anderson, co-owner of a Midwest hair salon chain Scissors and Scotch, said he and his partners were told by their banker Union Bank & Trust that they were approved for the loan, but more paperwork is needed to proceed.
“It was a little bit clunky,” Anderson said, noting that they still have no idea when they will see the money.
Bankers are pointing to the SBA’s slow computer system as being the main cause of the delays. Lenders are struggling to get applications across the SBA’s online system, which went down altogether on Monday (April 6). It also takes hours to reach SBA officials for assistance.
Further, community banks are nearly out of cash. The Federal Reserve announced earlier this week that a new program was in the works that would facilitate buying the loans from banks, but no information has been released yet.
New Jersey attorney Scott Salmon has assisted 75 small businesses with applications for PPP loans — but fewer than 10 have been notified of approvals, and none have gotten any cash.
The PPP is designed to offer loans backed by the federal government to SMBs with up to 500 employees. Those loans are forgivable if used primarily for payroll over the course of eight weeks.