The second round of SBA loan program faced an avalanche of applications and technical glitches at the same time.
The part two of the Small Business Administration's (SBA) coronavirus small business lending started on Monday. The demand for the loan increased. The number of applications doubled the initial round for the Paycheck Protection Program (PPP).
The unprecedented demand hampered the E-Tran, the lender’s portal to submit requests for the SBA loan, a senior SBA official told FOX Business.
"SBA is actively working to ensure system security and integrity while loan processing continues," the SBA official said.
"SBA is working around the clock to help all U.S. small businesses during these challenging times"
According to reports, the relaunch of the SBA’s PPP led to complaints from banks in the Midwest and along the West Coast. The problems revolved on the access to E-Tran.
Moreover, the Consumer Banker’s Association also raised the issues surrounding the re-launch hours on Twitter.
An SBA spokesperson explains the site was not malfunctioning but was “pacing” applications. This pacing aims to establish fairness and equitable access to both large and small banks.
This was not the first time the system encountered issues.
“When you do things in an emergency situation, it’s going to be far less than perfect,” Senator Marco Rubio told CNBC in the past.
“What we want to see is that the number of lenders in the system grows every day, and the number of problems and issues with the program diminishes every single day. So it will get better,” he added. “It has to get better.”
Loan application
Meanwhile, lenders received notification of the change on Sunday by letter. The updated guidance also covered measures to base funding on asset size.
"SBA and Treasury are taking prudent and reasonable steps to protect SBA’s loan systems for the next phase of PPP loan processing," an SBA spokesperson told FOX Business.
“The pacing mechanism prevents a lender from submitting thousands of loans an hour into the E-Tran system. If a lender goes above the pacing limit they will get timed out," the spokesperson added.
Meanwhile, small banks complained that larger lenders sent their applications in bulk, asking for loans on behalf of 15,000 businesses.
However, smaller lenders had to submit to a single application at a time. The SBA revamped the bulk processing threshold to 5,000. Still, several smaller bankers criticize the need for a minimum at all.
Based on Fox Business' report, SBA and the Treasury Department are implementing the following measures:
- "Pacing the number of loans processed in the E-Tran system for round two
- Instituting a maximum dollar amount at 10% of PPP funding authority that any lending institution will be able to originate, exclusive of the additional $60 billion preserved for lenders with assets under $50 billion (i.e. $60B cap)
- Implementing operational standards to ensure that lenders access PPP funds based on their asset size
- Ensuring the PPP continues to operate on a first-come, first-serve basis so that every small business has access to PPP loans to sustain their business and retain their employees
Small business loans are a significant part of the economic sitmulus package passed by the Congress and approved by US President Donald Trump to aid Americans who are suffering from the coronavirus outbreak.
