False Start on Payroll Protection Program


CMSDC

Financial institutions were overwhelmed by response from small businesses seeking access to SBA funding assistance.

SBAs Payroll Protect Program rollout on Friday, April 3rd was met with major hiccups, surprises, and frustrations. The “false start” created an enormous amount of confusion for banks and borrowers alike. Banks only had four days to set up a system that would allow small businesses to apply for a loan and be approved on the same day.

The some of the nation’s largest banks took varying approaches to the rollout. The day before the rollout on Friday, April 3rd, banks began notifying potential borrowers that they would not be ready. Some banks added unexpected requirements and modifications were made in real time on Friday.  Details were described in Forbes Magazine.

Borrowers will continue be extremely frustrated with a process that sends the application into a stagnant queue or that requires the borrow to re-apply again later.

Wells Fargo announced Sunday evening, April 5th, that it has exhausted its $10 billion capacity for lending under the SBA’s Paycheck Protection Program as the bank operates under a regulatory asset cap.

CARES allotted $349 billion for the Paycheck Protection Program, which provides small businesses employing less than 500 people with low interest loans up to a maximum of $10 million. The self-employed, sole proprietors and freelance and gig workers were also eligible to apply. The loans have many favorable features, including no personal guarantees or collateral required and payments deferred for six months. Best of all, part of the loan could be forgiven and not counted as income, if requirements were met.

Businesses still interested in applying should prepare the most recently approved Paycheck Protection Program application released by the Treasury.

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