Bloomberg Businessweek - USA (2020-04-20)

◼FINANCE BloombergBusinessweek April 20, 2020

● Bankslendingmoneyin a newfederal

programwerequicklyoverwhelmed

24

ThePaycheckProtectionProgramisa signature

partofthe$2.2trillionstimulusenactedinMarchin

theU.S.tocontainthepandemic’seconomicdam-

agefromthepandemic.It offerssmallbusinesses

loansofasmuchas$10millionthatbecomegrants

if theyusethemoneyforpayrollandcertainother

expensesinthenexttwomonths.Butmanybusi-

nessesatriskoffailurehavehadtroublegettingthe

fundsquickly.Althoughthemoneyhasstartedto

flow,there’snocomprehensivecountofhowmuch

businesseshaveactuallygotten,andthere’sworry

therewon’tbeenoughofit.

The$349billioneffortis runbytheU.S.Small

BusinessAdministrationthroughbanks.Yetinthe

weekafterit waslaunchedonApril3,theywere

intermittentlyshutoutofthegovernment’sloan-

processing system and left to fill out forms manually.

Lenders have complained about unclear guidance

and confusing paperwork. After questioning the use

of a sample loan form dating from 2002, they were

told they could use their own documents instead.

“We’re all for the program—everything about it in

theory is right,” says Heidi Brown, executive vice

president of Citizens State Bank in Iowa. “But it’s

like being sent out to build a house with only three

tools in the toolbox.”

Time is short to rescue small businesses. Filings

for U.S. unemployment claims recently reached a

three-week total of almost 17 million. Brown says

customers have been coming in or calling constantly.

“They’re desperate to get in line for the help,” she

says. “Unfortunately we can’t answer all their ques-

tions.” Being in line matters because the promised

money is already close to running out. As of mid-

day on April 15, the SBA reported there had been

more than 1.3 million applications approved, total-

ing about $296 billion of the $349 billion set aside.

Thatamounthasn’tbeengivenoutyet,but

representsthevalueofloanstheSBAhasguaranteed

forlenderstodisburse.TheTrumpadministration

wantstoaddanother$250billiontotheprogram,

butthatwillrequirenewlegislation.

Theinitiative,whichwascreatedandlaunched

ina matterofdays,ismorethan 10 timeswhat

theSBA’sflagshiploanprogramoversawlastyear.

Advocatessaytheagencyis tryingtogetit running

smoothly,andtherewereboundtobeglitches.

“SBA,workingcloselywithTreasury,launchedan

unprecedented$350billionassistanceprogramin

justoneweek,”spokesmanJimBillimoriasaidina

statement.“Thisis anhistoricachievementinan

incrediblyshortamountoftime.Duringthistime,

issuesidentifiedbylendersandborrowershave

beenquicklyresolved.”

JPMorganChase& Co.andothersweren’tready

tolendinitially,becausetheadministrationdidn’t

giveguidanceonprocessingloansfortheprogram

untilhoursbeforeit started.Manybankswouldn’t

takeapplicationsfromborrowerswhodidn’thave

anexistingaccount.Banksalsoblamedelayson

thetime-consumingfederalrequirementstover-

ifyidentities—rulesdesignedtospotterroristsand

moneylaunderers.WellsFargo& Co.,historically

one of the largest lenders to small businesses, had

to stop taking applications for a time because of a

regulatorycaponitsgrowth,whichwaslatereased.

TreasurySecretaryStevenMnuchinassured

borrowers during a White House briefing on

April 2: “You get the money. You’ll get it the same

day. You use this to pay your workers. Please bring

your workers back to work if you’ve let them

go. ... This is a very important program.”

The program was initially limited to SBA lenders,

meaning 60% of financial institutions couldn’t par-

ticipate and faced delays trying to get certified, says

Paul Merski of the Independent Community Bankers

of America. Online and other nonbank lenders can

apply to lend, but the application form was only

released a few days after the program launched.

Small business owners are also wary about

whether they’ll be able to get their loans forgiven

at the end of the eight-week period. “No one has

ever disbursed this amount of cash in such a short

amount of time,” says Justin Catalana, chief execu-

tive officer of Fort Point Beer Co., a San Francisco-

based brewer, distributor, and restaurant chain

which applied for a loan. “Not surprised things are

crashing.” �Mark Niquette, Jennifer  Jacobs, Michael

Sasso,andHannahLevitt

THE BOTTOM LINE As of April 15, the money set aside to help

small businesses was close to running dry, even as banks and the

SBA were ironing out the process of applying.

“No one has

ever disbursed

this amount

of cash in such

a short amount

of time”

A Chaotic

Race to

Save Small

Businesses