By Ray Birch
KETTERING, Ohio—While the Trump Administration is reporting tens of billions of dollars in SBA loans under the Paycheck Protection Program are flowing to financial institutions, one credit union says trying to get SBA loan requests processed is like “playing whack-a-mole.”
It has been that frustrating, said Bill Burke, CEO of Day Air CU, last week, adding his credit union is trying hard to serve business members even as the SBA’s system keeps crashing. Burke is concerned that not only are businesses not getting the money they desperately need during the pandemic, the CU’s reputation is at risk as well.
“We are having as much trouble as anybody accessing the SBA portal,” Burke told CUToday.info. “We have a lot of business members who are contacting us, and we're telling them we can help. We’re taking all of their information and we are processing Paycheck Protection Program loans, but there's a huge backlog caused by the SBA's system crashing, which is down all the time because of the volume.”
As CUToday.info reported, some other credit unions have been wrestling with similar issues, as have business lending CUSOs. Recently, improvements to the process have been made.
As of April 7, the Administration said 282,000 loan applications had been submitted by 3,350 lenders for a total of $76 billion, while 301 new lenders had been approved. The $349-billion Paycheck Protection Program is part of the massive $2-trillion CARES Act and makes loans of up to $10 million to companies with 500 employees or fewer to cover payroll costs. Those loans are to be forgiven if the borrower fulfills the terms of the loan.
‘Not Set to Handle This’
As CUToday.info has reported, the Small Business Administration has been overwhelmed with applications from SBA-approved lenders on behalf of borrowers. The SBA typically backs approximately $30 billion in small business loans each year.
“The SBA was not set to handle this, no doubt,” said Burke, adding credit unions are finding that out first hand. He is concerned about the impact of not funding loans quickly will have on the credit union’s reputation. Day Air is receiving “dozens” of PPP requests each day, and when Burke spoke with CUToday.info the CU had 100 applications in the pipeline with none approved.
“We have a huge backlog, and we're entering them into the SBA system as fast as we can, but the system keeps crashing,” said Burke. “It’s like playing whack-a-mole. It’s crazy and creating a sense of frustration and discouragement on the part of business members because they would like some assurance that the loan has been processed and they’ve been given an SBA loan number. They're looking for funding, and of course we're not going to fund the loan until we get an SBA loan number.”
Burke said business members don’t really understand why loans are not being funded.
‘They Blame it On Us’
Bill Burke
“They just look at the credit union and say we haven’t gotten them the loan. They don’t know the ins and outs of the SBA system. So they blame it on us,” he said. “This is a reputation risk for the credit union. We are putting ourselves out there as an SBA lender and doing whatever it is we can to help, but when the system breaks down and people’s loans aren't getting funded they could very well look at the credit union and be disappointed in our level of service. Obviously, that would be very unfortunate.”
Burke said on the consumer side Day Air is doing what most other credit unions are doing, pulling out all the stops to help members financially survive the pandemic. The CU is offering skip-a-pay, loan deferrals, emergency loans and more.
Burke said Day Air has received a fair amount of requests for loan forbearance, and he said many of those requests are not based on consumers paying close attention to the CARES Act.
“Nobody's bringing up the CARES Act too much at this point,” Burke said. “Some people know what's going on and they're asking for forbearance based on the CARES Act. But most, I believe, are just basing the request on their own personal circumstances—they’re laid off now and have much less income coming into the household. They're calling and asking us what we can do for them.”
Guided by ‘Mission’
Currently, Day Air is paying less attention to the bottom line.
“We're just being guided right now by our mission and core values, and not paying too much attention to anything to do with profitability or loss models, said Burke. “We believe if we do nothing but the right things and we're here for our members and our communities, what goes around comes around. All will be fine in the long run, we will get through this and we’ll go on.”
Turning back to the SBA backlog, Burke said the situation comes down to the government making promises and sometimes not backing them.
“What’s the old adage—'I’m from the government and I’m here to help’? It just makes me wonder,” said Burke.