PPP: More than 100,000 companies obtained emergency loans on day 1, but many remain frustrated


Business owners who have been waiting weeks for loans under the Paycheque Protection Program – originally designed to ensure employers can keep workers on the payroll during coronavirus shutdowns – may still be in the queue for another round of $ 310 billion in cash after some small lenders failed to upload even a few dozen applications.

Within minutes of relaunching the program on Monday, people were sending screenshots of errors received by lenders trying to download apps.

“It looks like the pace is slower than last time around,” an industry source said.

Monday’s pain was acute because the grim realities of the first-come, first-served program are sinking. Not all businesses that need a loan are going to get one.

“I don’t know what you are doing,” said another industry source who works with business owners. “The demand is skyrocketing. We realize that there are not enough loans for everyone.”

Capitol Hill lawmakers and advisers have said the problems are the price to pay for moving fast, as businesses desperately need them.

But Treasury Secretary Steven Mnuchin on Tuesday promised tighter monitoring of loan distributions after new revelations about large companies receiving money in the first wave – including the Los Angeles Lakers.

“I never expected the Los Angeles Lakers, who I’m a huge fan of the team, but I’m not a huge fan of the fact that they took out a $ 4.6 million loan. I think it’s outrageous and I’m glad they returned it or were responsible for it, “Mnuchin said during an appearance on CNBC.

He said the Small Business Administration would start reviewing all loans over $ 2 million before they were canceled. “We will therefore ensure that the intention of the taxpayers is respected here,” he said.

He went on to describe this review as a “full audit of every loan over $ 2 million”, noting that “the certification was very clear in saying that if people had other sources of cash they could not take that out. ready”.

Mnuchin said it was “unfortunate” that “a small number of companies,” including Shake Shack and Ruth’s Chris Steak House, have “created a lot of publicity”.

“I think it was inappropriate for most of these companies to take out loans. It was clear that there was certification,” he said, noting that the Treasury was “encouraged” by companies that have repaid these loans.

Numbers

The SBA said Monday afternoon that it had successfully processed more than 100,000 loans from more than 4,000 lenders.

The agency said “unprecedented demand” was responsible for problems in the system used by lenders to download applications. The agency also noted that, unlike the first round of loans, this time, the SBA has put a regulatory mechanism in place in the system to ensure that no lender – especially large institutions – can seize thousands of claims and get ahead of smaller banks. On the contrary, if a bank tried to enter more than 350 requests in an hour, the system would time out.

But small banks nonetheless said they were struggling to get many apps.

A source representing community banks said he heard from bankers across the country who had spent weeks preparing their cases for the stimulus before they were initially blocked.

Several industry sources rebuffed the idea that the stimulus mechanism was the only reason the system was unreliable. Instead, arguing the problem was that the SBA’s system was simply not equipped to handle volume despite multiple promises made to Congress and the industry that the system would be up and running this time around.

However, the scale and speed of distribution is an issue. The SBA has never, in the agency’s history, loaned the kind of money it is responsible for putting out right now. It would normally take years for the SBA to lend the more than $ 660 billion it currently gives.

Last minute changes to the program

Sources also pointed out that once again problems with the process on Monday stemmed in part from a lack of clarity from the Treasury and the SBA on what the stimulus would look like.

It wasn’t until Sunday afternoon that lenders learned that the system would be clocked in hourly. On Sunday, they also learned that the SBA would allow bankers with 15,000 or more requests to submit them en masse. Even after the directive was announced, the SBA updated it again on Monday to say it was lowering the limit for mass applications to 5,000.

Banks were then forced to decide whether it would be faster to try to download apps on their own or to pass them to the SBA for bulk processing. Sources said few banks ended up submitting their requests en masse for fear it could take the SBA weeks to process, leaving their customers in the queue after the money runs out.

Community bankers argued that mass demand options put them at a disadvantage. Congress assistants and those participating in the program have gone to great lengths throughout the process to gain clarity on who is eligible for loans and the responsibilities of banks when it comes to knowing your client’s requirements.

It was only when many leading, and in some cases publicly traded, companies admitted to receiving the emergency loans that the Treasury stepped in to remind companies that they should only apply if they did. desperately needed.

What to watch next

President Donald Trump speaks in the rose garden – The president is due to speak to the program, joined by small business owners, at 3 p.m. ET on Tuesday. There is no doubt that the President has seen some of the frustrations with the program, but so far there has been no major change in how it works or in who is eligible.

Will bankers be able to upload applications faster on Tuesday? – Slowdowns could mean it will take longer than expected for the money to run out. But, if the first round was any indication, the slowdowns in the bid process were resolved over the week.

Who gets the money this time around – Monday, the Lakers have joined the list of top companies that have obtained – and paid off – loans. The Treasury has attempted to issue dire warnings so that companies will only apply if they urgently need to. The first time around, companies may not have achieved the public scrutiny to which they would be subjected. This time around, it’s worth keeping a close eye on who gets the money.
Congress returns – Senate Majority Leader McConnell and House Democratic leaders announced on Monday that Congress will return next week. We are already starting to wonder how Congress will spend its time once it returns. Expect Democrats to want to start probing programs like the SBA. Senatorial Minority Leader Chuck Schumer sent that wake-up call on Monday.

“Now that Chief McConnell has decided that the Senate will meet again next week, he should ask his committee chairs to immediately begin vigorous and desperately needed oversight of the Trump administration’s response to the Covid pandemic. 19 and its implementation of the CARES Act, “Schumer wrote. . “There must be public hearings in the Senate, at a minimum, to examine why the United States still does not have adequate testing and why some lenders in the SBA’s Paycheck Protection Program have prioritized their clients’ claims. larger and richer at the expense of small businesses. who have often suffered greater difficulties. “

CNN’s Betsy Klein contributed to this report.


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