Companies seeking coronavirus bailout funds find ‘utter chaos’
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NEW YORK (AP) – Desperate small business homeowners who were hoping for a quick government lifeline to help them survive coronavirus crisis are still without funds, but are struggling with red tape, wary banks and overwhelmed IT systems.
Thousands of homeowners who have applied for loans under the government’s paycheck protection program are in their second week of waiting for their money.
And thousands of people who have asked for help through Small Business Administration economic disaster loans have waited even longer – some since mid-March.
A few got the money. But a panoply of problems at the SBA and banks are much more questioning whether they will be able to stay in business – they’ve been forced to shut down due to social distancing regulations or because customers have cut spending.
Those who are uncertain include owners who hope to avoid layoffs.
The cancellation of weddings, parties and other events has forced caterer Leslie Nilsson to lay off half of her staff of 10, but her kitchen workers are still working, preparing 500 meals a day for health workers in New York. York.
“If I don’t get this money, I don’t know how I’m going to pay it over the next two weeks,” said Nilsson, owner of Bartleby & Sage. She applied for a $ 349 billion paycheck protection loan. She also hopes to get her administrative staff back to work.
secretary of the treasury Steven mnuchin raised almost immediate cash flow expectations when, in announcing the paycheck protection program, he said businesses could receive their loans on the same day they apply.
But Mnuchin’s forecast did not take into account technological issues, including issues with the SBA’s E-Tran processing system on Monday. He also overestimated the ability of banks to bypass the massive number of requests they were receiving.
Since April 3, the program’s launch date, more than 791,000 applications have been approved by the SBA. In 2019, it processed less than 60,000.
Bankers say they knew when they entered the program that there would be a tsunami of demands. But even those expectations were flouted – Huntington Bank, the largest SBA lender by volume, received 16,000 inquiries on the first weekend. The bank processed 36,000 SBA requests in 2019.
A smaller bank, the Washington Trust Bank, located in the Pacific Northwest, received 1,900 requests in the first week, 20 times the number of requests processed last year.
“It has been absolute chaos, and we haven’t even reached the point where the program is fully open yet,” said Jack Heath, chairman of the Washington Trust. Heath said there were still 600 requests to be processed.
Some banks and loan brokers try to contain the expectations of homeowners. When Robert Bentz applied to TD Bank on Monday, he was told he would hear from the bank in three to five days. Bentz, owner of Purplegator, a digital marketing company based in King of Prussia, Pa., Later received an email from a TD staff member telling him that his application was under review.
But the demands of the banks have also frustrated homeowners. Many banks required applicants to have an existing relationship with the bank, for example, a business checking account, credit card, and line of credit. Long-time clients with only one or two accounts found themselves forced to apply elsewhere.
A week later, less than a quarter of banks had actually funded loans and sent money to businesses, said an executive of a banking group, who declined to be identified in order to discuss the issues. program details.
Landlord who got her money, Jennifer Tribble, applied through JP Morgan Chase on April 5, before the bank put an app link on their website. A Chase employee called Tribble and helped her complete the application, a hands-on process that seemed like a try before the bank’s online application went live three days after the program started.
Tribble received the money on Tuesday. Its three Pigtails & Crewcuts children’s hair salons in Orlando, Florida have been closed since March 23. She could not pay her 21 employees without the loan.
Loans of up to $ 10 million at an interest rate of 1% offer the rebate of money used to retain or rehire laid-off workers.
While some banks have been slow to put in place the infrastructure to accept applications, the problems have been compounded by technological issues at the SBA, bankers said. It takes more than an hour to submit each request to the SBA, the industry group executive said.
“These systems are not designed for massive volumes,” said Karen Kerrigan, chair of the Small Business & Entrepreneurship Council advocacy group.
Additionally, not all banks could use the SBA’s E-Tran system, leaving many community banks unable to help their customers.
Legal aspects also delayed the approval and funding process. Banks said they had to wait for the SBA to advise them on how to process loans and distribute the funds. Bankers still cautious a decade after the Great Recession were reluctant to make loans that the government might not guarantee.
Small business owners have also found economic disaster loans problematic.
The SBA began accepting applications in mid-March – those applications go directly to the agency’s website, www.sba.gov. Then, on March 29, he relaunched the app, using a new, streamlined version that allowed them to apply for a $ 10,000 grant from the $ 2,000 billion government relief package. This meant that homeowners who had previously applied had to reapply – but many did not know.
“Many members tell us the process is mired in confusion,” said Molly Day, spokesperson for the National Small Business Association advocacy group.
David Busker applied for a disaster loan on March 21 and has not received a response from the SBA. When he logged into the agency’s website the first week in April, he learned that he had to reapply and resubmit his documentation. Busker, whose CycleBar gyms in St. Louis have closed and who lost income in his consulting business, said he started the application process with low expectations.
“I’m not surprised but it’s still frustrating,” he said.