A fourth problem was the sheer chaos that resulted from the first round of PPP loans. President Donald Trump signed the CARES Act—which included the PPP loan provision—on March 27, a Friday. The loan program opened for business four business days later. Banks were inundated with applications; Bank of America received 10,000 applications an hour that first day. By the time the money ran out 14 days later, the bank had submitted 375,000 applications to the SBA.
The SBA, meanwhile, was dealing in volumes it had never seen before. Previously, $20 billion or so in small-business loans was the most it had ever processed in a year. Now it was trying to process $350 billion in a matter of weeks. Its outmoded computer systems froze from time to time. Sometimes applications fell through the cracks. Now that the banks and the SBA have been through this process once, one hopes it will go more smoothly this time.
Still, the core problem remains: Even with an additional $320 billion, it’s not nearly enough to help all the small businesses that need federal aid. Many companies are still going to be on the outside looking in.
After hearing so many complaints from small-business owners unable to get PPP loans, I posted a tweet over the weekend, asking where the PPP money was going.
I received hundreds of responses, from which emerged one main theme: the small-business owners who were happiest with the process had used community banks rather than the national giants. Curious to learn more, I called Edward Barry, the chief executive officer of Capital Bank N.A., which operates six branches in the greater Washington, D.C., area.
Barry told me that in the 14 days the program was open, his bank had gotten 598 applications approved, with a median loan amount of $118,000. (“A few were as small as $2,500,” he said.) Most were pre-existing customers, he added, but the bank also took on some businesses with which it had never had a previous relationship. “It was a good opportunity to show the power of this institution,” he said.
The reason the bank has been successful is that it put all its energy into the program. “It was a moral imperative to get this done,” Barry said. “We pulled people from other departments and put them on this. We put all our resources into this, and went at it seven days a week. We said, ‘Let’s build the process based on what we think it’s going to be and adjust once the government sets out the criteria.’”
Capital Bank guided customers who needed help gathering the information the SBA required. Then it raced to get the paperwork validated and off to the government. When the dust had settled, it was poised to hand out $172 million in loans. Now the bank is gearing up for the next round.
The new round of loans will surely go fast—probably within 48 to 72 hours. There is a provision in the bill the Senate just passed that sets aside $60 billion specifically for the customers of small lenders. It seems plain to me that that in these incredibly difficult circumstances all the banks—big and small alike — are doing the best they can. But if you’re a small-business owner and feel frustrated by your giant bank, let me give you a suggestion: Try your small local bank.
This article was provided by Bloomberg News.