Emergency loan program could run out of money in early June: Rubio
Demand for nearly $350 billion in stimulus funds aimed at helping small businesses weather the coronavirus outbreak has been so high that the money could run out by June 6, according to Sen. Marco Rubio.
Just a day after the Paycheck Protection Program was launched, the Florida Republican said in a Saturday tweet that lawmakers will likely need to approve more funds to help small firms meet payroll and cover other expenses until the economy recovers.
“Based on the demand on day one it is clear we will need more money for" the program in late May, said Rubio, who was one the main architects or the program.
The Small Business Administration and the Treasury Department estimated that approved lenders made 17,500 loans totaling $5.4 billion during the program’s first day, Friday. More lenders are expected to participate in the PPP in coming weeks.
The program, however, got off to a rocky start, with a number of community bankers complaining that they were unable to get the SBA to process applications or contact government officials for assistance.
The Independent Community Bankers of America sent a letter to SBA Administrator Jovita Carranza and Treasury Secretary Steven Mnuchin on Saturday detailing issues lenders were having with the emergency loan program.
“At this time … hundreds of lenders are still trying to get approval to access the SBA system so they can process loans,” ICBA President and CEO Rebeca Romero Rainey said in the letter.
“Please do everything in your power to support and enhance the overburdened” SBA systems, she added. “Without a more robust intake process, American small businesses in many parts of the country will not receive and deploy the funds intended for them.”
Rubio acknowledged those problems and said improvements would be made.
“Day one saw complications you would expect with [an] unprecedented $349 billion emergency plan passed just seven days ago,” Rubio said.
“However, a number of outstanding issues to address,” he added. “On Friday, we had various and extensive conversations with [SBA and Treasury] about the issues that emerged on day one. … I expect that early next week they will be releasing additional guidance that should provide clarity and help resolve many of these issues.”
To address issues with the SBA’s loan application system, known as E-Tran, Rubio said the agency had contracted with Amazon Web Services to help it handle the volume.
The SBA’s field office in Indiana acknowledged that E-Tran issues existed in letter to participating lenders obtained by American Banker.
“E-Tran is currently creating a loan authorization for PPP loans,” the letter said. “Unfortunately, it’s not at all consistent nor compliant with the PPP. Please do not close any loans using the current version of the loan authorization.”
The SBA also said it was “keenly aware” of issues lenders were having signing up for new accounts and unlocking passwords for existing accounts in the system used to enter PPP applications into E-Tran. The letter included links for customer service and instructions for opening a new account.
“We are aware that SBA’s technology team is working on a method to unlock all of the existing … user accounts in a batch,” the letter added. “As many of us can attest; that hasn’t happened yet. My understanding is that the team is continuing to work on this problem.”
Rubio, in a Sunday tweet, said he was seeing some signs of progress.
He pointed to a Florida bank that had a backlog of 4,000 applications on Saturday afternoon because 50 of its 70 loan officers were unable to access E-Tran. He said that late Saturday night, the SBA was able to get all of the lenders on the platform.
Rubio acknowledged that a number of banks were inclined to accept loan applications only from their own customers because doing so exempts them from certain anti-money laundering requirements. Many banks said they would limit participation to existing customers at the outset to avoid complications tied to Bank Secrecy Act compliance.
Rubio indicated in his tweets the fintechs could step in and help small businesses that were unable to obtain help from banks.
“The good news is [that] multiple fintechs, including PayPal and other online lenders, are ready, able and willing to process” PPP loans, Rubio said. “They need Treasury to release [the] application for nonbank lenders to become certified. I expect that very early next week.”
The tweets also touched on other issues Rubio said the SBA needs to address, including the eligibility of 501(c)(3) groups.
The SBA issued guidance over the weekend to clarify that faith-based organizations are eligible to receive PPP loans “regardless of whether they provide secular social services.” The agency said that no “otherwise eligible organization will be disqualified from receiving a loan because of the religious nature, religious identity or religious speech of the organization.”
Despite the early complications, Rubio said he expects the program, part of a $2.3 billion stimulus package President Trump signed into law March 27, to ultimately work as intended.
“When you launch something this unprecedented and far-reaching, just seven days after it became law, you are going to have some problems,” he said. “The good news is every problem we saw on day one of PPP can be fixed. We will stay on it to make sure it gets better each day forward.”
Kevin Wack and John Reosti contributed to this report.