WASHINGTON–Round two of the Paycheck Protection Program kicked off yesterday with much of the same confusion and frustration that plagued the first round of the PPP.
The $310-billion that became available yesterday replenished the fund, which is supposed to be used to help businesses of 500 employees or fewer cover payroll costs and maintain headcount. The initial $349 billion that funded the program as part of the CARES Act ran out of money due to overwhelming demand in less than two weeks.
That demand continued when the PPP relaunched on Monday, and many of the same problems were soon bedeviling financial institutions and companies attempting to log into the Small Business Administration’s E-Tran System.
NBC News reported interviewing numerous financial institutions having issues with lockouts, login issues and sluggish systems in attempting to process applications for client businesses. One bank was locked out of the system after submitting just 60 loans, NBC News said.
“The system is so limited in its current state that it will take nearly a month to get through the entire queue,” one banking executive told NBC News.
The new round of funding includes $30 billion reserved for loans by smaller financial institutions, such as credit unions.
CUNA's chief advocacy officer, Ryan Donovan, responded to news the SBA was prioritizing large bulk application submissions with a statement saying, "The failure of the SBA’s ETRANS system is a disturbing blow to the efforts by credit unions working tirelessly to connect Main Street businesses with lifeline PPP loans. Credit unions will keep trying to submit applications through this narrow and uncertain portal. Furthermore, we encourage the SBA to reduce the threshold for bulk submissions to ensure that community-focused lenders have a fair shot at accessing this crucial program.”
News of the bulk app filing was hardly the only issue. As CUToday.info reported here, one review of the program’s first round of PPP loans has found funds going to many companies that according to Congress should not have received funds—including the Los Angeles Lakers. Some of those companies have returned the funds.
A Backlog of Applications
According to NBC News, after two weeks of refining their systems, processing documents from hundreds of thousands of applicants, and hiring and training personnel across the country, the five largest banks had more than one-million applications for over $100 billion ready to go by the 10:30 a.m. start of the second round of loans. Those applications were all the backlog from the first round.
Under the new round of loans that began Monday, financial institutions with a large number of applicants will send a file containing a minimum of 5,000 loans to the SBA. “Submissions will be processed individually” and “the loans of all lenders will be processed at the same rate per hour,” according to the new guidance, up to a maximum of 350 per hour.
No lender will be able to originate more than $60 billion in loans, according to the new guidelines.
“SBA notified lenders yesterday that pacing of applications into the E-Tran system would occur, meaning all lenders would be able to submit at the same rate per hour," SBA Administrator Jimmy Billimoria told NBC News. “The pacing mechanism prevents any one lender from submitting thousands of loans an hour into the E-Tran system. If a lender goes above the pacing limit they will get timed out.”
The new “lender gateway” built by Amazon Web Services for the SBA was supposed to make it easier for some new lenders to swiftly submit applications to the SBA’s system, NBC News reported.
As of 3:30 p.m., the SBA told NBC News it had processed more than 100,000 loans from more than 4,000 lenders.
Bankers Call for Improvements
The Independent Community Bankers of America (ICBA) issued a statement calling on the SBA to improve the system.
“After working tirelessly to get ready for the second round of PPP funding for their customers and communities, most community banks found themselves continually kicked out of the E-Tran system this morning after the program’s relaunch went live,” said ICBA President/CEO Rebeca Romero Rainey. “It is unacceptable for community banks to be locked out when their customers need them most. Community banker frustration is exacerbated by the lack of clear information coming from the SBA and Treasury Department. This dearth of information is leaving community bankers and their customers concerned about preferential treatment for the very largest banks.
“We urge President Trump, Treasury Secretary Mnuchin and SBA Administrator Jovita Carranza to provide community banks with information about the situation and let us know when the system will work,” Romero Rainey continued. “Congress was very clear in their intent that this second round of PPP funding better serves community lenders and their local small business customers. Timing is critical, and Treasury and SBA should deploy a better solution to help the customers and communities we serve during this challenging time.”