The Small Business Administration’s system that processes loans is still slow. Some banks are seeing more loan applications. And although the amount of funding being sought is significantly smaller, there is concern that not everyone requesting a loan will receive one.
Those are some of the issues that New Orleans-area bankers have noticed since the Paycheck Protection Program restarted Monday. The program, which offers a forgivable eight-week cash flow to businesses, ran out of $349 billion two weeks after it launched on April 3. Congress has added $310 billion to it.
But the SBA’s E-Tran system that banks use to submit customers’ applications “continues to be maddeningly slow,” said Ron Samford, president and CEO of Metairie Bank. The SBA said Monday that it had processed over 100,000 applications from more than 4,000 lenders by that afternoon, and were seeing double the number of users compared to any day during the PPP’s initial round.
Fidelity Bank, which was able to input 250 to 300 applications per day in the first round, was only able to input nine on Monday, president and CEO Chris Ferris said. The entire system crashed at 2 a.m. on Tuesday, he said, likely due to the SBA’s announcement that banks with at least 15,000 applications could submit them all at once. The number was later lowered to 5,000.
“It’s a shame for community banks and the small businesses we are trying to serve now,” Ferris said. “The technical glitches have me concerned. We have some of the smaller institutions that can’t bulk process that are going to have clients that may miss out. It’s an unintended consequence of this bulk processing that the SBA has said is allowed for larger financial institutions.”
Tuesday afternoon the SBA said about 476,000 loans had been approved totaling more than $52 billion.
At some New Orleans banks, loan applications have increased. Gary Blossman, president and CEO of First Bank & Trust, said the bank has received, processed and submitted over 500 applications in this round compared to over 450 in the previous one. The vast majority are expected to be funded tomorrow, he said.
Fidelity also has seen an increase, which Ferris attributed to being a preferred SBA lender, offering help for businesses gathering documents and a high rate of success in getting applications funded initially.
Metairie Bank has received slightly over 300 loan applications since Monday, around the same number as the bank approved and funded in the first round, Samford said.
Guy Williams, president and CEO of Gulf Coast Bank & Trust Co., said the number of applicants this week has been much smaller.
“I think most people got in on the first round,” Williams said. “We also reached out to people in the first round. We are seeing a significant drop-off in applications.”
Customers who applied in the first round and didn’t receive loans have been given priority since the program reopened.
All of the banks report that new applicants are requesting smaller loans.
Samford said loan applications are averaging just under $50,000 per request, about half the average he saw in the first round.
One reason is that the initial round was not open to self-employed workers or independent contractors until April 10. The PPP ran out of funding six days later.
Bankers also say that larger companies have more capability to handle the amount of documentation required for the loans, such as a CPA or chief financial officer on staff.
Williams said the program was originally designed to prioritize companies with larger numbers of employees.
“The point was to keep more people on the payroll,” he said.
He said there are reasons to be optimistic that funding won’t run out as quickly in this round. Larger companies that are publicly traded and have other sources of capital are returning millions of dollars they received at the request of the SBA. The new round includes specific allocations of funding for smaller institutions, while larger ones have a cap.
Also, Louisiana bankers have performed better than other states. The state ranks No. 25 in loans generated nationwide, according to an SBA analysis.
“I think we may be able to satisfy demand,” he said. “That’s my real hope.”
Blossman said he’s optimistic all of his customers will receive loans in this round.
“I think everyone who has come to me and given us the information needed to process their request will likely get funded this time,” he said.
But he said others who applied through another bank or didn’t gather the necessary documents in time might not be so lucky.
“I pray for all the small business owners,” he said. “It’s going to be rough out there.”
The Associated Press contributed to this report.
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