The Trump administration is struggling to work out the kinks of a coronavirus small-business loan program after a chaotic start Friday.
Some banks say they are unable to access Small Business Administration (SBA) platforms, while industry leaders say there are unanswered questions about applying for loans and how to take advantage of them.
On Monday, the SBA loan processing platform crashed and was down for hours, preventing lenders from processing any loans, Bloomberg News reported. The system was back up Monday afternoon.
Restaurants and startups are among those who have had trouble navigating the program.
“We told our restaurant owners when the bill was passed to begin setting up their files and putting the calls in to their personal banks so they can hit the ground running. Banks are still identifying if this government program makes sense for them to participate or they still have unanswered questions before they will jump in,” Sean Kennedy, National Restaurant Association executive vice president of public affairs, told The Hill.
The restaurant industry has been one of the hardest hit, as tens of millions of Americans are told to stay home.
The Treasury Department and SBA last week rolled out applications for the $349 billion Paycheck Protection Program (PPP), designed to provide loans for small businesses to meet payroll and other basic expenses during the coronavirus pandemic.
Bank and credit union employees are vetting, approving and processing the applications, which totaled 78,000 loan requests for $22 billion as of Sunday morning.
“SBA officials emphasized that they have been balancing security and speed in providing access to the systems that allow banks to make PPP loans,” the American Bankers Association said after a meeting with Treasury Secretary Steven Mnuchin and other Treasury and SBA officials Sunday.
A day earlier, the restaurant association had a call with Treasury officials and received a commitment that they will do everything they can to work with the industry to provide solutions to the loan program issues.
“As we look at the SBA loan programs coming out right now, what’s clear to us is that it’s a Band-Aid that’s getting smaller against a wound that’s getting bigger,” Kennedy said. “There are still a lot of unanswered questions on how certain small restaurant chains can take advantage of these given the way they’re organized.”
He added that restaurants are having issues with the rules on when the loan has to be taken out, when the money has to be used by and details about the percentage of the loan that can be spent on non-payroll costs.
For restaurant franchises, it’s a mixed bag.
“If you’re a smaller franchisee, and your brand is on the SBA Franchise registry, and you can find a bank who is participating in PPP, you are getting money and the program is working as intended,” said Matt Haller, International Franchise Association senior vice president of government relations and public affairs.
Other franchises have already been denied loans.
“If you’re a franchisee and your brand isn’t on the franchise registry, government bureaucrats are rejecting you even if your bank accepts the loan application. It’s clear discrimination purely on the basis of operating under a brand rather than as an independent business,” Haller said.
The Treasury Department and SBA did not respond to requests for comment.
Startups backed by venture capital (VC) firms are having trouble, particularly about whether they are eligible for loans and if the number of their employees has to include employees of its venture capital investor.
“Big problems early on were bank participation — mostly resolved — and limiting loans to existing customers — in progress. Still open questions about eligibility for VC-backed startups due to affiliation rules,” said John Lettieri, CEO of the Economic Innovation Group, in an email to The Hill.
Wells Fargo began taking loan applications on Monday and the bank said it will focus on small businesses with fewer than 50 employees. The program is for firms with fewer than 500 workers on payroll.
“We are committed to helping our customers during these unprecedented and challenging times, but are restricted in our ability to serve as many customers as we would like under the PPP. While all businesses have been impacted by this crisis, small businesses with fewer than 50 employees and nonprofits often have fewer resources. Therefore, we are focusing our efforts under the Paycheck Protection Program on these groups,” Wells Fargo CEO Charlie Scharf said in a statement Sunday.
Mnuchin on Friday touted Bank of America’s approval of loans in an attempt to quell concerns about the program’s launch. The bank said Monday it had received more than 178,000 applications worth almost $33 billion, which is about 9.4 percent of the total available in the program.
Hundreds of thousands of small businesses are expected to compete for the loan pool and the administration has stressed they are working to get the loans to businesses as quickly as possible.
“All indications confirm the money is being allocated very quickly, but many businesses are unclear as to when they’ll actually receive it,” Lettieri said.