Tag Archives: Small Business Administration

U.S. Congress approves extension of small business Paycheck Protection Program

By Richard Cowan

WASHINGTON (Reuters) – A majority of the U.S. Senate on Thursday agreed to extend the coronavirus pandemic Paycheck Protection Program (PPP) until the end of May, giving small businesses more time to apply and the government more time to process requests.

The bill, passed on a vote of 92-7, has already been approved by the House of Representatives and now goes to Democratic President Joe Biden, who is expected to sign it into law.

The PPP provides loans to small businesses struggling to survive during the COVID-19 pandemic, which has resulted in millions of businesses curtailing their operations or even shutting down for periods.

The loans convert into grants if the recipients meet certain conditions.

Without congressional action, the program would expire at the end of this month.

Senate Small Business Committee Chairman Ben Cardin said that applications could not be completed by then, adding that the $1.9 trillion COVID-19 aid approved by Congress this month expanded eligibility to more first-time borrowers, including non-profit organizations such as the YMCA.

“We are reaching the most needy,” Cardin said in a speech on the Senate floor on Wednesday urging passage of the extension.

The legislation gives the Small Business Administration 30-days, beyond May 31, to complete processing loan applications.

The PPP was designed to stanch the loss of millions of businesses, such as restaurants that were particularly hard-hit by the pandemic. Critics complained that large companies and well-to-do law firms won millions of dollars in funding, especially in the early days of the program nearly a year ago.

Republican Senator Susan Collins called the PPP “a life-line for small businesses,” saying more than $718 billion in loans already had been approved. He said it had secured tens of millions of jobs.

(Reporting by Richard Cowan; Editing by Tim Ahmann and Edmund Blair)

Under government pressure, big U.S. lenders rush to launch more pandemic loans: sources

By Koh Gui Qing, Michelle Price and Pete Schroeder

WASHINGTON (Reuters) – The U.S. government is pressuring large lenders to go live this week with another round of a key federal pandemic loan program despite many unresolved issues, sparking an industry scramble to get lending platforms ready, five people familiar with the discussions said.

The Paycheck Protection Program (PPP) reopens to large lenders on Tuesday, with many big banks including JPMorgan Chase & Co, Wells Fargo & Co and Bank of America, ready to start accepting applications, their representatives said.

But with dozens of changes to the rules and government technology system, the latest round is much more complex. Some industry executives worry that the government pressure to launch with so many unresolved issues could cause a rerun of the paperwork and technology snags that dogged last year’s launch.

While the program helped millions of small businesses, last year’s problems contributed toward some needy borrowers missing out while some ineligible companies and fraudsters got funds, oversight watchdogs have said.

A spokesman for the Small Business Administration (SBA), which jointly administers the PPP with the Treasury Department, said Congress expected the latest round to be launched swiftly to get cash to needy businesses as quickly as possible.

“SBA, in consultation with Treasury, is working around the clock to fulfill this congressional desire … and urges lending partners of all sizes to continue assisting eligible small businesses,” he added in an emailed statement.

As of Friday, the industry was circulating an eight-page document, seen by Reuters, of questions on the rules, required documentation and technology processes.

“Everyone is trying to move really quickly … but it’s just really difficult to launch a $300 billion program in a few weeks. People are struggling,” said Dan O’Malley, chief executive of Numerated, which provides PPP loan processing software to banks.

“The SBA and Treasury are pushing because of the economic need. They’re just trying to do the right thing,” he added.

Last week, officials contacted large lenders to ensure they would start accepting applications on Tuesday, said one of the five people, who spoke on condition of anonymity. Another person with knowledge of the discussions said officials are also anxious to get as much cash out the door as possible before Democratic President-elect Joe Biden takes over on Wednesday.

Under the program, lenders make loans to be repaid by the government provided borrowers spend the cash on eligible costs.

Last year, lenders issued 5.1 million loans worth $525 billion. As the pandemic drags into a second year, Congress granted $284 billion more in funds and changed the rules on eligible borrowers and expenditures.

Richard Hunt, chief executive of the Consumer Bankers Association, said the industry had “dedicated thousands of bank employees to make the process as efficient as possible.”

In addition to changes to the rules for first-time PPP loans, borrowers will be allowed a second loan provided they can show a 25% hit to their revenues. To fix technology capacity issues seen last year, the SBA has introduced a new loan application technology platform for lenders.

Combined, lenders say these amount to substantial changes. As of Friday, outstanding questions ranged from how to calculate employee numbers, which revenue documents were needed and how closely lenders must review them, to how borrower affiliates should be treated and requirements for loans to be forgiven, according to the document and sources.

The second source with knowledge of the discussions said more time to iron out the wrinkles could help mitigate “bad behavior.” But the first industry source said with so much confusion over who was eligible for second-time loans, he was more worried the SBA would reject applications.

Still, some small lenders which went live last week noted they’d had longer to prepare than last year and that their experience had so far been positive. A different industry source said big banks had tested their systems over the weekend and were “cautiously optimistic” Tuesday would go smoothly.

(Additional reporting by Pete Schroeder; editing by Jonathan Oatis)

Thousands of small-business loans may have been fraudulent, U.S. House panel finds

By Susan Cornwell and David Morgan

WASHINGTON (Reuters) – Tens of thousands of loans worth billions of dollars may have been subject to fraud, waste and abuse in the $659 billion taxpayer-funded Paycheck Protection Program (PPP) aimed at helping small U.S. businesses survive the coronavirus pandemic, according to a report released by Democratic lawmakers on Tuesday.

Over $1 billion went to companies that received multiple loans, in violation of the program’s rules, the House of Representatives Select Subcommittee on the Coronavirus Crisis said.

At an afternoon hearing, the panel’s chairman, Democratic Representative James Clyburn, chided Treasury Secretary Steven Mnuchin for saying previously that delivering aid quickly made it inevitable for Treasury to run into issues of waste.

“That is a false dichotomy. Taxpayers should not have to choose between quickly getting aid to those who need it and wasting federal funds. And there are simple steps that could have been taken to improve oversight and reduce fraud,” Clyburn said.

Democrats in Congress and the Trump administration have been at loggerheads since July over further steps to bolster the economy after Congress approved trillions of dollars in March to respond to the coronavirus pandemic.

“We are sensitive to the fact that there is more work to be done and certain areas of the economy require additional relief,” Mnuchin told the committee.

The PPP provided more than 5.2 million forgivable loans through the U.S. Small Business Administration (SBA) by the time it ended on Aug. 8.

The SBA did not immediately respond to requests for comment.

The Trump administration says the PPP has saved some 51 million jobs at a time when much of the U.S. economy has been shuttered due to the coronavirus.

Economists say the actual impact is far lower, likely between 1 million and 14 million jobs.

Republicans on the committee issued their own report saying the small business loan program had avoided fraud to the extent that is typical with other large government relief programs, such as those following Hurricanes Sandy and Katrina.

The Democratic-led panel found more than 600 loans went to companies that should have been ineligible because they had been barred from doing business with the government. Another 350 loans went to contractors with previous performance problems.

Nearly $3 billion went to businesses that were flagged as potentially problematic by a government-contracting database.

Staff found evidence that as few as 12 percent of Black and Hispanic business owners received the full funding they requested.

The SBA’s internal watchdog has also found “strong indicators” of potential PPP fraud.

(Reporting by Susan Cornwell and David Morgan; Editing by Andy Sullivan, Chizu Nomiyama, Steve Orlofsky and Richard Chang)

White House to hold call with banks as hundreds struggle to access small business loans

By Pete Schroeder

WASHINGTON (Reuters) – The White House was due to speak with banks on Tuesday, as the administration’s $350 billion program to support ailing businesses continued to confront hurdles, with some of the nation’s largest lenders sitting on the sidelines and others unable to access the system.

As of Tuesday, Citibank  said it was still not accepting loan applications under the program, which began on Friday, while Wells Fargo & Co , which has capped lending under the program at $10 billion, said it had yet to distribute any funds to clients.

The Small Business Administration (SBA), which is jointly administering the program with the U.S. Treasury Department, had not yet launched a promised online system for taking on lenders that have never previously registered with the agency, according to the Independent Community Bankers of America (ICBA).

“That’s an issue if you’re a non-SBA lender, which is more than half of the lenders out there,” said Paul Merski, an executive vice president at the ICBA.

He said lenders are also still waiting for the administration to produce a compliant loan authorization form which would help speed up the distribution of funds, although he said guidance issued by the Treasury late on Monday night had helped to address some other issues with the program.

A top White House economic adviser, National Economic Council Director Larry Kudlow, said on Tuesday that $50 billion in loans had been originated. However, it remained unclear how much of that money has been distributed since paperwork issues are holding up disbursements at some banks, according to industry sources.

Representatives for the Treasury Department and the Small Business Administration did not respond to a request for comment. On Monday, the agency defended its progress, saying the program was unprecedented and pointing out that billions in loans had been authorized by the SBA in a very short time.

Launched on Friday as part of a $2.3 trillion congressionally approved economic relief package to combat the disruption caused by the novel coronavirus, the program got off to a rocky start as the administration rushed to get funds out the door in days without establishing key terms and paperwork.

Speed is critical, since half of small businesses have less than a two-week cash capital buffer. But the resulting confusion, bottlenecks and technology glitches have sparked widespread frustrations among bankers and businesses alike and left the U.S. Treasury and the SBA scrambling to fix the problems on the fly.

“You couldn’t have scripted a better #trainwreck for our nations community banks and the small biz customers we serve!” Brad Bolton, president and chief executive of Community Spirit Bank in Alabama, tweeted on Monday night.

The SBA overnight authorized 30 loans out of hundreds Bank of the West has been trying to process, Cynthia Blankenship, who runs the lender’s operation in Grapevine, Texas, told Reuters.

“We are continuing to be inundated with requests,” she said, adding that many of those are from companies turned away by their big lenders, including Wells Fargo, which has said it is constrained by a regulatory cap on its balance sheet.

Multiple small business owners took to Twitter over the past 24 hours to flag a document they had received from Wells, one of the biggest small business lenders in the country, advising potential applicants to reach out to other banks “to improve your chances of receiving a loan before the funds run out.”

Prominent lawmakers including Democratic Senators Elizabeth Warren, Ed Markey and Chris Van Hollen also jumped into the fray on Tuesday, raising worries that less savvy small businesses without existing bank lending relationships will be shut out of the program.

With banks and their trade groups warning that funds will run out way before the June 30 application deadline, and with worries over an unfair distribution of the cash, Senate Majority Leader Mitch McConnell, a Republican, said on Monday he hoped to quickly authorize a further $200 billion for the program.

Republican President Donald Trump was scheduled to talk with top executives of major banks, including JPMorgan & Co In  and Goldman Sachs Group Inc, and Independent Community Bankers of America members on Tuesday afternoon to discuss the program, according to industry sources.

“We’re calling to make the system more robust, and are supporting additional appropriations for this. … We want to make sure there’s a geographic dispersion to all areas of the program,” said the ICBA’s Merski.

(Reporting by Pete Schroeder; additional reporting by Imani Moise and Ann Saphir; Editing by Michelle Price, Bernadette Baum and Jonathan Oatis)

U.S. small-business rescue loan program enters fourth day plagued by technical problems

By Pete Schroeder and Michelle Price

WASHINGTON (Reuters) – The U.S. government’s $350 billion small-business rescue program entered its fourth day on Monday, plagued by technology and processing problems that are delaying disbursements to businesses hurt by the novel coronavirus, according to industry groups, bankers and an email seen by Reuters.

U.S. lenders, inundated by thousands of loan applications, struggled to access the government’s technology system for processing the paperwork over the weekend, and the paperwork itself changed more than once, the sources said.

“We know that your efforts have been frustrated with system issues, policy questions and slower than usual responses,” the Small Business Administration’s regional offices wrote to bankers on Saturday evening, according to an email seen by Reuters.

Many lenders have had problems signing up for new user accounts with the SBA’s platform, while bankers who already had accounts have had issues unlocking them or resetting passwords, the email said. It said the SBA was working to unlock all of the existing user accounts in one batch.

SBA also alerted lenders in the email that its technology platform’s loan authorization form was “not at all” compliant with the terms of the rescue program.

“Please do not close any loans using the current version of the loan authorization!” it said.

Congress created the unprecedented program as part of a $2.3 trillion stimulus package passed at the end of March to help businesses that have either shut down or have been dramatically curtailed by the coronavirus pandemic. Borrowers could apply for the loans via participating banks from Friday until June 30.

Over the weekend, the Independent Community Bankers of America (ICBA), which represents thousands of small banks, complained to the Treasury and SBA about the “failed technology” and “massive delays” its members were experiencing with the SBA platform, which was not designed to process the huge program.

Community bankers also took to social media to complain about the form changes and being locked out of the system, rebutting claims by President Donald Trump that all was going well.

“Going well?! Hell nearly every community bank in the nation is locked out of the … SBA platform!” Noah W. Wilcox, chief executive and chairman of Grand Rapids State Bank, who chairs the ICBA, tweeted on Sunday.

A senior Trump administration official on Monday defended the progress made so far and said launching such a huge program in just one week was unprecedented.

“As of today – Day 4 – we’ve surpassed $35 billion originated; more than 100,000 small businesses have successfully applied and more than 2,000 lending institutions are up and running,” the person said.

“Starting today, the SBA is offering a lender hotline and our 68 district offices across the country will be available to assist lenders,” the official added.

The Trump administration originally promised the loans in a matter of days. It was unclear how much of that $35 billion had been dished out to businesses as of Monday since the banks are the ones who disburse the funds. According to two industry sources, paperwork problems have prevented all but a fraction of banks from distributing the funds.

“It would have been better to have all these things resolved at the front end,” said Carrie Hunt, general counsel for the National Association of Federal Credit Unions.

Some small businesses say they have had problems even finding a willing lender given that many are backed up with thousands of applications and are not processing new clients.

Grant Geiger, CEO of EIR Healthcare, which makes modular healthcare products, said he spent Friday unsuccessfully searching for a bank to take his application after his current bank said it was not yet accepting submissions.

“We were ready last week. Friday morning, we had no place to go,” he told Reuters on Monday.

(Reporting by Michelle Price; Editing by Steve Orlofsky and Sonya Hepinstall)