Coronavirus loan program approves more than $52 billion in relief
The Trump administration said it’s approved more than $52 billion in loan requests for small businesses so far in the relaunch of a coronavirus relief program, even as lenders said they’ve struggled to submit applications and advocates worry that funds will run out before many mom-and-pop businesses get help.
The U.S. Small Business Administration said it’s processed almost 476,000 loan applications from almost 5,200 lenders as of 1 p.m. New York time Tuesday. The Paycheck Protection Program offers loans of as much as $10 million meant to keep workers at small businesses employed amid state stay-at-home orders.
President Trump said there were twice as many lenders accessing the SBA’s system in the first 24 hours after the program’s restart than on any day of the initial round of funding. He said the agency also processed 30% more applications than on any previous day, and in smaller amounts.
“Demand is extraordinarily high,” Trump said at a White House event featuring a coffee shop owner, an optometrist and others from small businesses that have received funding under the program.
The initiative restarted Monday with an additional $320 billion that Congress approved last week, after the initial $349 billion ran out on April 16 in just 13 days. At the current pace of approvals, the additional funding will be exhausted in a matter of days.
But the relaunch has been rocky, with lenders reporting they can’t access the SBA’s system amid a flood of applications. The program allows loans to become grants if proceeds are spent to maintain payrolls and for certain expenses for two months.
The SBA on Tuesday told lenders they could not use robotic systems to help submit applications. With that measure, it said, the system “will be more reliable, accessible, and equitable for all small businesses.”
Treasury Secretary Steven Mnuchin said on Fox Business that SBA teams worked through the night to address issues, but lending groups said access was still spotty on Tuesday. Paul Merski of the Independent Community Bankers of America compared it to trying to fix bad plumbing by replacing some washers and faucets.
“The bottom line is the system just cannot handle volume,” Merski said. “It’s going to be ongoing frustration and hopefully they can make improvements, but the system is the system.”
During the first round, the SBA guaranteed 1.66 million loans totaling $342.3 billion, with an average loan size of $206,000, according to an agency report. The SBA said the average loan so far in the second round is $111,000, and that the $30 billion Congress said aside for small lenders to dole out has almost been exhausted.
Reports of large public companies and big chains getting loans have sparked outrage. Mnuchin announced on Tuesday that all loans of more than $2 million will be audited before they are forgiven to check the borrower’s certification that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.” Businesses have until May 7 to return their loans without penalty.
Mnuchin said at the White House event Tuesday afternoon that the SBA has a team and will bring in additional people to review those loans. “We will make sure that these certifications were done accurately, or the loans won’t be forgiven and there will be liability” criminally, he said.
Earlier Tuesday, Mnuchin told CNBC he’s glad large public companies and entities including the Los Angeles Lakers are now returning their loans. More than $2 billion from the first round was declined or returned and will now be made available, SBA Administrator Jovita Carranza said in a tweet on Monday.
The SBA’s rollout is drawing the attention of lawmakers. Democratic Senator Jack Reed of Rhode Island is calling for a congressional investigation and audit into how the program is being administered by banks and overseen by Treasury and the SBA. He said in a release the program has been “been plagued by problems, mismanagement, and lack of sound guidance” — and that “favored companies are winning while small businesses are being shut out.”
Republican Senator Josh Hawley of Missouri also tweeted Monday that “big banks give their richest customers concierge service and they go to front of line” and that the relief legislation “does NOT authorize this special treatment by big banks for their wealthiest clients.”
Senate Minority Leader Chuck Schumer said on MSNBC that Treasury and the SBA failed to give guidelines to the banks that would have pushed more of the financing toward smaller firms. Republican Sen. Martha McSally of Arizona called for more guidance on how applications should be processed to ensure independent contractors, self-employed individuals and other small enterprises get relief.
Lending groups have complained it’s still unclear how the agency is processing applications, and some question whether they will be handled equally on a first-come, first-served basis.