America’s $350bn small business loan programme has been hamstrung by a host of technical glitches preventing thousands of applicants from receiving any money.
The lending program—a part of the $2tn Coronavirus Aid, Relief and Economic Security (CARES) Act—has been disabled by a system malfunction that blocks lenders from processing the loan applications.
The programme offers loans of up to $10 million to companies with fewer than 500 employees.
For businesses that meet certain conditions (such as using the bulk of the money to pay workers’ salaries during the eight weeks following the loan closing) the loans can be forgiven.
Over the 30 million small businesses across the country depend on the loans to get through the global pandemic.
A flood of applications
Bank of America and JPMorgan received tens of thousands of applications within hours of the program’s launch, according to senior executives at both companies.
Bank of America alone reported receiving over $22bn in requested funds.
Richard Hunt, CEO of the Consumer Bankers Association, said in a statement:
“We would ask for everyone to be patient as banks move heaven and earth to get a system in place and running to help America’s small businesses and the millions of men and women who work at them.”
A system overwhelmed
To begin the lending process, small businesses must submit their application via an online portal on their bank’s website. A banker then conducts a phone call with the applicant.
However, there’s no way in the hastily fashioned system for the banks’ computers and those of the Small Business Administration (which administers the Paycheck Protection Program loans) to talk to one another.
Bankers have resorted to entering applicant information by hand into E-Tran, the proprietary system used by the SBA to guarantee loans and generate loan numbers.
With banks reporting tens of thousands of applications just in the first day, the system is already overwhelmed. The SBA usually processes about 60,000 loans in an entire year.
Senior banking executives at Bank of America and Chase say they are still waiting on loan numbers to come back from the SBA.
So far, they have not processed any more than a trickle from the flood of applicants.
Bankers are working on systems to automate and speed up the process. But they say they have no idea when loan applicants will start to see money in their accounts.