When Fathom Unlimited Inc. needed financial help in April as the pandemic led to a loss of customers, founder Pavia Rosati turned to her bank, Capital One Financial Corp., for help, The Wall Street Journal (WSJ) reported.
But the New York consulting firm was on its own because Capital One wasn’t prepared to accept applications for the Paycheck Protection Program (PPP) when it launched.
Worse, no one offered a hand, she told WSJ. A bank employee referred her to Capital One’s toll-free customer service hotline.
That was it. Rosati switched banks.
“Why would I work with a bank that was so unhelpful to me at the moment I needed it?” she told WSJ.
It turns out Capital One was not alone in its inability to deliver some of the $650 billion in forgivable loans to small- to medium-sized businesses (SMBs) for payroll and other disbursements during the lockdowns.
Instead of loaning the money directly to businesses, the Small Business Administration (SBA) empowered banks to distribute the cash.
In a July survey of 931 firms that received PPP loans, Barlow Research Associates, the Minneapolis-based bank market research company, revealed that of the businesses that secured PPP funding, 28 percent received their loan from a lender with whom they had no prior relationship or a bank that wasn’t their primary one. About 44 percent of those SMB borrowers said they would move at least some of their business to the bank that came through for them during PPP, the survey found.
Rosati got a $30,000 PPP loan from a financial technology company and transferred the funds to Grasshopper Bancorp Inc., a New York-based startup bank that launched last year.
Capital One told WSJ its SBA lending portfolio was modest but that it worked overtime to process PPP applications. The bank said it funded more than 14,000 PPP loans as of July 1.
Stan Doida, the firm’s managing attorney, told WSJ that Wells Fargo didn’t immediately accept PPP applications, and he panicked when word spread that the initial $350 billion in PPP funds was nearly exhausted.
A Wells Fargo spokesman said delays were created due to its volume of requests and evolving government requirements.
Last month, PYMNTS reported the PPP lifeline for SMBs approved 4.9 million loans for more than $521 billion. The agency has estimated 87 percent fell below the $150,000 threshold, averaging $107,000.