As Round 2 of SBA Lending Opens, Frustrations Continue

Slowdowns, technical problems, and frustration. The emergency loan program continues to be plagued with problems.

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On Monday morning, the Small Business Administration resumed accepting applications from lenders participating in the Paycheck Protection Program, a program aimed at helping businesses impacted by COVID-19. The first round of funding ran out in less than 2 weeks, leaving countless small businesses frustrated and uncertain about the future. The outlook may be even more bleak for minority-owned businesses; in fact the Center of Responsible Lending estimates that at least 90% of businesses owned by people of color will not be able to secure a PPP loan through a mainstream bank or credit union.

In addition to the $320 billion in new PPP loan funding approved by the president on Friday, this round includes $60 billion allocated to the Economic Injury Disaster Loan (EIDL) program. SBA administrator Jovita Carranza also tweeted on Monday that more than $2 billion from the first round of PPP funding was “either declined or returned and will be made available in the current application period.”

The Center of Responsible Lending estimates that at least 90% of businesses owned by people of color will not be able to secure a PPP loan through a mainstream bank or credit union.

Unfortunately for businesses awaiting the next round of funding and lenders scrambling to make those loans, the SBA’s online system crashed within minutes of reopening on Monday.

“Our member banks across the country are deeply frustrated at their inability to access @SBAGov’s E-Tran system,” tweeted Rob Nichols, president and CEO of the American Bankers Association. “We have raised these issues at the highest levels. Until they are resolved, #AmericasBanks will not be able help more struggling small businesses.” (ETran is the SBA’s electronic loan processing system.)

Curt Queyrouze, president of Utah-based TAB Bank, tweeted that after 5 hours, his bank had “only managed to get 7 applications through ETran.” (They were able to fund $45 million in PPP loans for 80 customers during the first round.)

When reached by phone Monday afternoon, Queyrouze said they were up to 11 applications with a team of 23 employees trying to submit them. None of his attempts had gone through.

“Mostly it’s just timed out constantly,” he says. “There are 4 or 5 different error messages. It looks like the system’s just frozen.” The other bankers he’d talked to have had similar experiences. “Nobody’s having any success,” he says.

The SBA reportedly told Fortune it would apply a pacing limit so that lenders can submit at the same rate per hour. That’s not how Josh Pape, chief banking officer at Citizens Bank of Edmond in Oklahoma, sees it. He tweeted, “the position of the @SBAgov that the slowness issues with #Etran are by design to allow equality amongst lenders makes no sense! If we were all working on a faster system, wouldn’t that still be equal? A pace of less than 1 loan per hour is by design?”

The SBA also notified lenders that they could make a one-time bulk submission of SBA-ready loan applications. “The minimum amount of SBA-ready PPP loans that a lender must have ready for XML file submission is 15,000 loans,” reads an SBA email to lenders. “Submissions will be processed individually and each loan in the bulk submission will be subject to funds available for the program and subject to the individual lender cap.”

However, Nichols tweeted that the minimum has since been lowered from 15,000 applications down to 5,000. That bulk submission is due by Monday at 9pm Eastern.

That could still disadvantage small community banks and local credit unions that may not have 5,000 applications for a bulk submission. On Monday, Pape tweeted to the SBA and Treasury, “it is unacceptable that large banks are able to submit bulk XML files while #communitybanks are subject to inputting files individually into a broken #ETran system that has not allowed submissions. Our customers deserve to start from the same starting line!”

Queyrouze says his bank has 1,150 PPP applications ready to submit, too few for a bulk submission. “We were motivated because it means so much to these businesses,” he says. “We gave them hope that they’re going to have success and I don’t know what to tell them now.”

For many lenders and the small businesses they serve, the game of wait and see continues.

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