The Small Business Administration acknowledged to banks Monday in an email obtained by The Washington Times that there are frustrating flaws in its system for handling loan applications for distressed small businesses, even as the White House and lawmakers considered a second round of massive aid for companies.
“We know that your efforts have been frustrated with system issues, policy questions and slower than usual responses,” stated an email from SBA regional offices to lenders.
Among the problems: the SBA’s electronic system for processing loan applications, called E-Tran, wasn’t coordinated with the $350 billion Paycheck Protection Program that the administration rolled out Friday.
“E-Tran is currently creating a loan authorization for PPP loans,” the SBA’s email stated. “Unfortunately, it’s not at all consistent nor compliant with the PPP. Please do not close any loans using the current version of the loan authorization!”
The email also said the SBA was “keenly aware that many lenders are having issues signing up for new user accounts and unlocking/resetting passwords for existing user accounts in the Capital Access Financial System so that they may enter applications for the PPP into E-Tran.”
“Unfortunately, our District Office personnel have absolutely no means to set-up user accounts, unlock user accounts or reset passwords,” the email said.
Some lenders reported Monday that the SBA’s system crashed as they tried to submit loan applications, many of them from current customers.
President Trump said late Monday that the Paycheck Protection Program is performing well despite “a couple of little glitches [that] have already been taken care of.”
“As of today, tens of thousands of small businesses have applied for more than $40 billion in relief,” he said. “These funds will result in nearly 2 million jobs being preserved, so we’re taking care of our workers, small businesses and our workers. Nearly 3,000 lenders have already made loans under the program.”
Addressing a journalist who asked about problems in the program, Mr. Trump retorted, “You’re just incapable of asking a question in a positive way.”
The president said the administration is “signing up additional lenders very quickly and rapidly. The community banks have been very responsive, and larger banks are stepping up.”
He said if the program runs out of money from its success, “we will ask Congress to refill it immediately.”
White House economic adviser Larry Kudlow said the administration’s efforts with the Paycheck Protection Program are top-notch.
“We’ve got a great start on that, a lot of loans … $38 billion, and it’s 130,000 loans from 2,400 lenders, big banks included, a lot of it’s community banks,” Mr. Kudlow told reporters. “I think we’re doing OK, frankly. I know there are always a few glitches, but I’d give it an ‘A.’ You might not agree.”
Sen. Marco Rubio, Florida Republican and chairman of the Senate Committee on Small Business and Entrepreneurship, said Monday that the SBA “has been working through the weekend with Amazon to improve the system that bankers used to interface with it.”
“Hopefully, those improvements will make a difference,” Mr. Rubio said on CNBC. “You’re talking about something here that is $350 billion, has no precedence, has never been done before. You’ve got to create this massive program and its rules in six days and launch it. Anytime you do it that way, of course you’re going to have some issues, but we have no choice. This is an emergency situation. And when you do things in an emergency situation, they’re going to be far less than perfect.”
Mr. Rubio said the Treasury Department late last week “had to rewrite all the rules that SBA put out because they were way too confusing and did not reflect in any way the law that we wrote.”
The SBA had no immediate comment.
As the administration tried to work out the kinks in its new program, the White House and congressional Republicans were discussing the need for another round of government aid for distressed small businesses.
Mr. Kudlow said he is discussing with President Trump and Treasury Secretary Steven T. Mnuchin the idea of issuing 50-year coronavirus “war bonds” to raise money, some of which could be used for small business loans and grants.
“If we need more money, we’ll go and seek more money, and to that point, we’ll finance it,” Mr. Kudlow told reporters.
The president also has suggested that some of the money would go to a second round of direct payments to most Americans, who are expected to start receiving checks of $1,200 each within the next two weeks.
Mr. Rubio said he has been talking with Senate colleagues about the need for another bundle of money to help small businesses. He said the aid from the $2.2 trillion economic rescue package signed into law two weeks ago is not enough.
“That is an issue that’s going to have to be confronted here,” Mr. Rubio said. “What we did a couple weeks ago was an emergency sort of move to deal with a crisis in front of us. I believe Congress is going to have to go back in some way, shape or form and address additional things that have emerged since then.”
He said the next aid package must include “replenishing the fund on the small-business loan program, because I believe that those funds … will not reach June 30.”
The Paycheck Protection Program offers loans to small businesses to keep their employees on the payroll for eight weeks and pay some overhead expenses. If a business meets the employee retention requirements, then the government will forgive most of the loan amount.
Mr. Trump also has spoken positively about another rescue package, but White House officials say such a move is premature. Mr. Kudlow said the administration wants to see how the current $2.2 trillion plan helps workers and businesses.
“Let’s see what happens. Our job is to execute what we’ve got,” Mr. Kudlow said. “You’ve got assistance [checks] going out to 175 million people. We have to execute what we’ve got on the table. It’s a massive package. Give it a few weeks minimum, a month, and let’s see how effective we are, let’s see how efficient we are.”
The Consumer Bankers Association said many of its members are engaging with the SBA to deliver the urgently needed aid to small businesses.
“The majority of CBA members are now taking applications, and some are already funding loans,” said CBA spokesman Nick Simpson. “We expect both those numbers to go up in the coming days as banks continue working around the clock to get this new program firing on all cylinders for small businesses, and we are also continuing to work with SBA on necessary additional implementation guidance.”
Banking industry sources reported that loan demand is high, with some banks receiving nearly twice as many applications than they received for standard SBA loans all of last year.
“This program does $20 billion in a normal year,” one banking source said. “Now we are doing $350 billion in a matter of weeks.”
Bank of America dropped its requirement that Paycheck Protection Program applicants already have a lending relationship with the bank after it was swamped with complaints. It said about 171,000 of its customers had applied for paycheck protection loans worth more than $32 billion.
Wells Fargo & Co. said it already had “reached its capacity” for applications because of a regulatory cap on its lending amount.
The program is aimed at companies with 500 or fewer employees. But an exemption was granted for franchise owners in any business that employs more than 500 workers, as long as a single outlet doesn’t have more than 500. That waiver is causing anxiety among some small-business owners, who worry that they will be left out before flaws in the application process can be resolved.
• Dave Boyer can be reached at dboyer@washingtontimes.com.
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