On Paycheck Protection Program Launch, Banks See a Flurry of SBA Loan Applications

April 3 marks the first day that small businesses can apply for loans under the new Paycheck Protection Program (PPP).

The PPP loan program is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which passed last Friday and allots $349 billion to help business survive the economic upheaval of COVID-19. Unless it’s extended, the program runs through June 30, 2020.

As more cities and states issue lockdown or shelter-in-place orders, the pandemic has impacted businesses in virtually every sector of the U.S. economy.

In fact, a 2016 report from JPMorgan Chase & Co. studying over half a million small businesses found that the median business holds just 27 days of cash buffer in reserve. Some cities and states have been under lockdown orders for weeks, and it could strength on for much longer.

In fact, a 2016 report from JPMorgan Chase & Co. studying over half a million small businesses found that the median business holds just 27 days of cash buffer in reserve.

What is the Paycheck Protection Program?

The goal of PPP is to provide low-interest loans so that businesses with fewer than 500 employees can continue making payroll and paying expenses such as commercial rent. This includes freelancers and sole proprietors who have no employees, as well as nonprofits impacted by COVID-19.

Provided the money is spent on operating expenses during the first 8 weeks after loan origination, the loan can be forgiven. The Small Business Administration (SBA) also requires that at least 75% of the loan be spent on payroll to qualify for loan forgiveness.

Standard SBA loans take 5 to 10 business days to process, but the hope is that these loans could be processed even sooner. The SBA has around 1,800 banks in its primary lending program, but thousands of additional financial institutions may also be able to lend through the program.

Banks flooded with loan application requests

It sounds great in theory; however, many of the 25 banks and credit unions Workest contacted today were not ready to accept loan applications because the program is so new. Those that are accepting applications are already seeing huge demand in the first few hours.

Many of the 25 banks and credit unions Workest contacted today were not ready to accept loan applications because the program is so new. Those that are accepting applications are already seeing huge demand in the first few hours. 

At 9 a.m. Eastern Time Friday, Bank of America started accepting applications from its nearly 1 million customers who have an existing small business lending and business deposit relationship.

“We’ve been processing approximately 10,000 applications per hour, and were up to well over 75,000 as of 4 p.m. ET, totaling more than $7 billion in loans requested,” wrote media relations executive Matt Card in an email this afternoon. “We had teams working 24/7 and throughout the night the last few nights in order to have this application online this morning. Bank of America is processing these applications as quickly as possible.”

The bank had prioritized its customers with an existing borrowing relationship but the policy evolved over the course of the day to include small business customers who don’t have a borrowing relationship. They recommend that small business borrowers submit an application through their core bank, as the institution with an existing relationship may be able to approve the loan more quickly.

“We’ve been processing approximately 10,000 applications per hour, and were up to well over 75,000 as of 4 p.m. ET, totaling more than $7 billion in loans requested.”

Moving operations to 7 days a week

Huntington, a regional bank based in Columbus, Ohio, also began accepting PPP applications today.

“Huntington is proud to advocate for small businesses, especially during this unprecedented time,” emailed Emily Smith, Huntington’s vice president of media relations. “We anticipate a large volume of applications and we will process applications for our customers as quickly as possible. We are already seeing tremendous interest and expecting substantially more activity this quarter.”

Smith added that they have “taken steps to meet demand including shifting staff to more than double the size of the team handling this volume and moving to 7-day-per-week operations.”

‘We are prepared to originate half a billion dollars’

Funding Circle is a global small business loan platform that connects investors with small businesses in the U.S. and elsewhere.

“It is Funding Circle’s intent to offer Paycheck Protection Program loans once we receive the application and the Administration approves us to do so and we are able to secure the facilities to fund these loans either through the private market or the Federal Reserve’s Main Street Small Business Loan Program,” emailed Joe Rauch, head of U.S. communications.

“Assuming that happens today, we are prepared to originate half a billion dollars by June 30th which will save more than 15,000 small businesses and 81,168 jobs — not including economic multipliers.”

If your primary financial institution isn’t accepting applications yet, keep checking. The SBA has this sample application form on its website, so that loan applicants can gather the information they need and prepare to apply.