Out of ABC News, Taylor Dunn reports on the initial challenges being faced with business owners applying for the newly implemented Paycheck Protection Program. A message of patience from the Consumer Bank Association President. Also, a nice reassuring comment from Larry Kudlow, National Economic Council Chairman, who sums up what we can all expect out of the program. Here’s the report:
Across the U.S. banking industry, officials scrambled overnight to stand up a massive new government-backed lending program to help small businesses ravaged by the coronavirus pandemic and many were unable to make it happen by the Friday deadline given that the Treasury Department released its guidelines for the loans late Thursday night.
The $350 billion federal program — called the Paycheck Protection Program — was a key part of the recently-passed $2 trillion COVID-19 stimulus package. The Paycheck Protection Program is a relief plan designed to extend loans, backed by the federal government, that become grants if the money is used for payroll and other overhead operating expenses.
Despite the major problems in implementation, Treasury Secretary Steven Mnuchin tweeted Thursday night that the program was up and running with a link to the application guidelines.
But across the U.S., at banks big and small, the program is simply not yet operational. And experts said it would be a week before the program was fully up and running.
Wells Fargo stated on its website Friday, “Financial institutions like ours continue to receive program implementation guidance from the SBA and the U.S. Treasury. Unfortunately, as a result, Wells Fargo will not be able to start accepting applications on Friday, April 3rd. When we are able to take applications, you’ll find a link to that application on this page so check back often.”
“The applications were just released a little more than 12 hours ago, literally in the middle of the night,” said one banking industry official. “Some loans will go out today and we hope the system will be running on all cylinders early next week. It is important to remember banks were handed the operator’s manual for a $350 billion program at 6:30 p.m. the day before it was supposed to launch. Expectations were unrealistically set but rest assured banks are doing everything humanly possible to get this system up and running to help small businesses.”
Two separate banking industry sources indicated to ABC News on Friday that applications were not received for both prospective borrowers and lenders until 10:30 pm Thursday night.
Additionally, some new lenders are having trouble accessing the SBA application site called “E-Tran,” according to two industry sources.
One source said there have also been security concerns with the portal that are currently being addressed.
Despite Bank of America Chairman and CEO Brian Moynihan touting his institution’s success in standing up its program in record time — telling CNBC that the bank has taken in 10,000 applications as of Friday morning — much ire was directed at the bank online and by one powerful Senate committee chairman.
“BankofAmerica got bailed out with $45 billion of your tax money. But now just heard from #smallbusiness with a BOA account & a 400k line of credit they paid off. BOA denied #PPP loan because they don’t have a credit account. A ridiculous requirement that isn’t anywhere in law,” tweeted Small Business Administration Committee Chairman Marco Rubio, R-Fla, who was integral in creating the new PPP program.
Moynihan told CNBC that his bank is prioritizing those who have an established lending relationship with Bank of America.
“We are prioritizing. We have a million borrowing customers we’re trying to get through the system first. Then our second priority will be the customers who have the core operating account with us but don’t borrow anywhere,” Moynihan said. “For those that borrow from the other 4,000 banks in the country, we’re trying to get them to go back to their bank.”
Still, small business owners who maintain accounts with Bank of America but don’t have open lines of credit were surprised to discover their loan applications were denied Friday morning.
Patrick Slaughter, the owner of a small law firm in Knoxville, Tennessee, says he has a business credit card and business checking with Bank of America, but has never needed to apply for a business loan. With his loan application denied for now, Slaughter says he could be forced to lay off his employees within a few weeks.
“It’s an emotional thing for me. Truth is, I could probably retire and walk away from this. But I’ve got too many people that didn’t do anything wrong that were hopeful we were getting this help from the government,” Slaughter said.
Slaughter said Bank of America contacted him a few hours after he was initially told he did not qualify for a Paycheck Protection Program loan at this time with an offer for a conventional loan or a credit card.
“They are purposefully denying us this Paycheck Protection Program opportunity so they can profit by selling us their loans,” Slaughter said.
“We know for these businesses speed is of the essence. We can move fastest with our nearly 1 million small business borrowing clients. That is our near term priority. As the administration has made clear going to your current lending bank is the fastest route to completion,” said Bank of America spokesperson Ball Haldin.
Late Friday, Bank of America said loans will become available to those without a lending relationship “soon.” A source close to the matter says that could happen within days.
One Bank of America official expressed frustration that the bank was seemingly being targeted for denying customers who don’t have open lines of credit, considering the bank is one of the few actively processing applications. As of Friday afternoon, the bank said it had already assisted more than 58,000 customers with SBA loans.
Lindsey Johnson, the CEO of Weezie, an e-commerce retailer of linens based in Georgia, said she spent the week poring over the CARES Act, preparing all of her financial information, and stayed up late into the night to wait for the application to go live.
“No one has ever mentioned the stipulation about having a lending relationship,” she said. Johnson has 28 employees she has been able to keep on payroll, but she said the situation is “very much wait and see.”
“It feels like this was like an oversight. My hope is that Bank of America changes their requirement. I feel hopeful that they will. It’s in their best interest to keep their clients. If you can’t turn to your bank in a time like this, it’s like, where else are we supposed to go?”
Consumer Bankers Association’s President and CEO, Richard Hunt, counseled patience Friday, saying in a statement, “Having just received guidance outlining how to implement a $349 billion program literally hours before it starts, we would ask for everyone to be patient as banks move heaven and earth to get a system in place and running to help America’s small businesses and the millions of men and women who work at them.”
But that message was incongruous with statements from administration officials.
Just before Noon on Friday, Secretary Mnuchin tweeted, “UPDATE #PPPloan now over $875,000,000 processed almost all from community banks! Big banks taking applications and will submitting them shortly. @SBAgov @USTreasury.”
And some were insisting any problems with the Paycheck Protection Program were minor.
“I think this program is ready,” National Economic Council Chairman Larry Kudlow told Fox News. “They always have glitches when they start out. It’s a massive undertaking, but at the end of the day, these are guaranteed loans and they will be forgiven if you cover your payroll and other expenses. You have eight weeks to do that. I think it’s a tremendous opportunity, a 1% interest rate. Again the U.S. Government is guaranteeing these loans let me also say for people who are looking to apply they should be moving rapidly.”
The Treasury Department has not responded to a request for comment.
ABC News’ Taylor Dunn contributed to this report.
- Taylor Dunn