The relaunch of a government relief program for small firms got off to a rocky start Monday, with lenders reporting being shut out of the overwhelmed U.S.
The SBA said that “unprecedented demand” was slowing down its loan-processing platform, and that there were double the number of users accessing the system compared with any day during the initial round of funding that ended April 16. The SBA said in a statement that it had processed more than 100,000 applications from more than 4,000 lenders as of 3:30 p.m. New York time.
Shortly after the SBA’s Paycheck Protection Program restarted this morning, lenders reported that they either couldn’t access the system or were being kicked out as they tried to submit applications on behalf of small-business owners, said
The glitches echo the first round of the program, when lenders were repeatedly locked out of the loan platform. The initiative restarted Monday with $320 billion in fresh funds after the initial $349 billion
The second round of funding -- similar to the first -- has been plagued by vague guidance and ongoing changes to the process. One senior banker, describing the process on condition of anonymity, said SBA’s decision to allow lenders to submit applications in bulk was unclear and came at the last minute.
The SBA said it notified lenders on Sunday that it would pace the rate of applications into its E-Tran system, meaning that all lenders should be able to submit at the same rate. The pacing mechanism was designed to prevent any one lender from submitting thousands of loans into the system at once. A lender that goes above that limit would get timed out of the system, an agency spokesman said.
But with the SBA limiting applications to 350 per hour per lender, according to a person familiar with the matter, it could take days or even weeks to get each bank’s applications through -- prolonging the amount of time it will take for small businesses in dire need to get their funds.
Merski said lenders are frustrated because they don’t understand how SBA is processing the applications, and the agency hasn’t provided an adequate explanation. It raises the fear that borrowers will get shut out because success may depend on who’s able to access the system before the funding runs out again, he said.
“It’s all serendipity, who gets in and who doesn’t,” Merski said. “There’s some serious issues that need to be addressed.”
The program allows for loans of as much as $10 million per borrower and is meant to help small businesses affected by the coronavirus pandemic keep workers on their payrolls. The loans become grants if companies use them for payroll and approved expenses for two months.
Even before the first new application was processed Monday, advocates
The initiative, which first launched April 3, was marred by delays and glitches after guidance on how to process loans wasn’t released until the night before, and many
Bigger companies including
The SBA and
More than $2 billion from the first round was declined or returned and will now be made available, SBA Administrator
Still, large banks including
To ensure access for all of the more than 5,000 lenders approved to participate in the program, the SBA
(Updates with SBA limiting applications to 350 per bank, per hour in ninth paragraph)
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