Small businesses working with small community lenders moved ahead of the line this evening for about 8 hours in the SBA Payroll Protection Program (PPP) sweepstakes.
In a tweet, SBA Administrator Jovita Carranza confirmed that the SBA is only accepting loan applications from smaller community banks and their clients until Midnight.
To assist small community lenders and ensure their small business customers have access to the #PaycheckProtectionProgram, today from 4 PM EDT – 11:59 PM EDT, @SBAgov systems will only accept loans from lending institutions with asset sizes less than $1 billion.
— Jovita Carranza, SBA (@SBAJovita) April 29, 2020
This decision follows a concern that large national banks were hoarding the applications process as many had still been accepting SBA PPP loan applications when there was no funding.
Bank of America apparently had a backlog of over 184,000 thousand PPP loan applications it sent over on Monday when the SBA reopened the PPP lending program again after receiving an additional $310 billion in funding from Congress last week.
JPMorgan Chase & Co. stopped taking loan applications on the runup to the second round of funding so it could get its backlog ready for transmittal to the SBA.
“I wish we could help every business through this program, but funds could run out again quickly and we have preexisting applications in our queue.”
Jennifer Roberts, chief of the JPMorgan Chase & Co. consumer unit’s business-banking division
SBA Trying to Level the Playing Field
Lawmakers and the Administration have come under criticism that many of the problems in the first round were not fixed in the law, and the program would likely result in many small businesses, especially in rural communities, not being able to get a chance at PPP loans.
While some tweaks were made to the program to try to give more small business owners an opportunity at the loan program, big banks still have the resources and had the backlog to flood the system.
“One of the big changes was that $60 billion was sectioned off for smaller lending institutions. $30 billion was for banks and credit unions with assets between $10-50 billion. Another $30 billion was set aside for institutions with less than $10 billion in total assets,” said Bo Steiner, the Illinois district director of the SBA.
“We’ve put in some controls to help meter applications, so no one institution gets all of the applications. We also put limitations in that at no single lender can take up more than 10 percent of the total appropriation that’s available,” Steiner continued.
Today’s decision by the SBA to tip the scales firmly toward small lenders for about eight hours shows the tweaks were not enough, and the SBA felt it had to give another boost to smaller banks and their customers.
Unfortunately, despite all best efforts, three points will dominate the news cycle again shortly:
- The program will be again out of money quickly, possibly even faster than the first round due to the backlog of loan applications from round 1.
- There will be again stories about big or influential companies receiving PPP loans ahead of micro business that probably needed them more. U.S. Treasury Mnuchin vowed to audit all loans over $2 million, but once the money is lent out and until the audits can be completed, many small firms may have to shut their doors by then.
- Will Congress appropriate more money, and if so, how long will it take as the battle over future coronavirus relief bills will become more political?
Midnight The Flood Gates Will Open Again
Starting at Midnight, all size lenders will be able to submit loan applications again. There is no indication the SBA will offer another window exclusively for smaller community banks again during this round of PPP loans.
While large banks are temporarily shut out of the SBA system, they continued to accept applications, meaning high volumes of PPP loan applications will start to flood back in on Thursday at 12:00 am.
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