By: First Union
Paycheck Protection Program Complications and Failures
On Friday, April 3rd, 2020, after going through numerous alterations, the $349 Billion emergency Paycheck Protection Plan was released. The PPP means to provide small businesses (with under 500 employees/) two month's worth of funding to keep existing employees on the payroll during current stay-at-home orders that many of us are facing today.
While anticipating the start date, lenders began working with clients, scrambling to collect the information required by the SBA, including but not limited to an official PPP Loan Application. Details were scarce, and the rules were changing, sometimes numerous times a day. However, late on Friday morning, The SBA announced that only FDIC-insured lenders would now have the ability to assist business owners who were desperately looking to acquire funding.
On the evening of Thursday, April 2nd, it was apparent that banks would not be ready to start processing these loans. The loan processing guidelines were still being adjusted, leaving lenders literal hours [at best] to prepare for the next day. That evening, Chase sent out notices to their customers warning that they, and all other financial institutions, were still awaiting guidance from the SBA and the US Treasury, thus funding applications would likely not be accepted on Friday, as expected. By Friday morning, many banks still weren't up and running.
Virginia Senator Mark Warner tweeted, "The #PPPLoan is a lifeline for small business... but only if it works. Seeing concerning reports of technical problems with @SBAGov's E-Tran site preventing loans from getting out to small businesses. I know people are working on this, but we need to get it sorted out ASAP."
Banks were worried about the potential liability for fraudulent loans. One such guideline was the "Know your customer" verification, suggesting that this be the quickest way to determine if a customer met the requirements set out by the SBA. Some banks have chosen not to get involved, forcing business owners to call other banks, only to be declined because they weren't existing customers.
Bank of America managed to get its portal up and running on Friday. Once live, it received over 10,000 applications within the first hour. However, many customers were turned down because they didn't already have any existing and outstanding loans with the bank. Due to the major influx of applications coming in, many existing clients weren't able to apply online, causing a stream of complaints to arise. By early afternoon, Bank of America announced that it had granted more than 58,000 loans, receiving approximately $6 billion in applications. As of Saturday, April 4th, Bank of America received more than $26 billion in applications. Unfortunately, Bank of America has announced that business owners who do not have existing loans with the bank would not be eligible for the PPP Loan.
We realize these are trying times. But hope is not lost! If you need fast funding for your business, First Union Lending can help. Call us at 863-825-5626 to speak with a specialist. We're committed to helping small businesses in need.