Small lenders that cater to underserved communities are warning the Trump administration that they won't be ready for Monday's restart of the Paycheck Protection Program and called on officials rushing to roll out the small business rescue to take more time.
The SBA and the Treasury Department Friday morning announced their timeline for restarting the program with more than $284 billion in new funding from Congress. The agencies plan to give exclusive access for the first few days to lenders that serve minority-owned businesses and those in distressed areas, after criticism that the first iteration of the program last year left those employers behind. Private banks are responsible for issuing the loans, which can be forgiven if employers maintain their payroll.
But as of Friday evening, the SBA had only just released required application forms and begun briefing lenders on a new loan processing system that they will have to use to begin releasing funds. That prompted the Community Development Bankers Association, which represents lenders that would have special access at the beginning of next week, to ask the SBA to give banks more time to prepare for the launch, said the group's CEO, Jeannine Jacokes.
"How are we going to do this?" Jacokes said. "For most of these folks, they've got to get everything set up. They've got to get their people trained. It's not flick-on the lights. People have to know what they're supposed to do."
The timing, she said, ran the risk of putting underserved borrowers at a disadvantage if they didn't have enough time to begin offering the loans when the SBA gave them an exclusive time slot. The banks are among the smallest in the country, and Congress is dedicating $15 billion for them to make loans. Representatives of the lenders said they only learned of the Monday launch date on Friday morning.
The alarm from small lenders was the latest complication in the SBA's execution of the Paycheck Protection Program. When the PPP opened in April, it suffered from incomplete guidelines and technical glitches as the agency tried to launch an unprecedented emergency rescue.
The new iteration reflected lessons learned by Congress and administration officials — particularly the focus on hard-hit businesses in distressed communities — but lenders were nonetheless uneasy as the SBA and Treasury tried to pull off another quick turnaround.
An SBA spokesperson declined to comment. On Friday morning, the agency said it would give the community-focused lenders exclusive access to the PPP for much of next week. Large banks expected they would not be able to begin offering PPP loans until the week of Jan. 18.
The timing left small banks feeling like they would be test subjects for a revamped program that has revised loan eligibility rules and a new tech interface to receive loan applications. Representatives of large and small lenders alike said Friday that they were still learning critical details of SBA's new loan processing system.
"I understand the desire to put this out as quickly as possible but I'm afraid we're going to have a real serious problem meeting customer expectations when we have no idea how the application even looks," said Robert James II, chair of the National Bankers Association, which represents minority banks. "I'm afraid we'll end up being kind of the lab rats and not really able to functionally help our customers."
James said his own bank in Savannah, Ga., has 13 full-time staff including tellers. More than 80 percent of its nearly $9 million in PPP loans last year went to Black businesses, he said. Many of the bank's borrowers need time to pull together documentation and "don't have a CPA on speed dial," he added.
"It's not necessarily an advantage to go fast," James said. "It's an advantage if we have a portal that's dedicated to us and the time that we need."
The Community Development Bankers Association, the group that requested more time, represents so-called community development financial institutions that serve low- and moderate-income areas. Jacokes said the largest among them has roughly 1,000 employees but some of them are staffed by 30-40 people.
"Any more time can be helpful," Jacokes said. "You can't put something out on Friday night and expect people to be ready Monday morning."
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