In an effort to prevent big banks from siphoning off the majority of the new $ 310 billion in Paycheck Protection Program (PPP) funding, the Small Business Administration (SBA), which oversees the PPP program, released a statement on April 29, 2020 that small financial institutions would have an exclusive window of time to submit loan applications from their clients.
“I am proud to share that as of today from 4:00 p.m. to 11:59 p.m. ET, SBA systems will only accept loans from credit institutions with assets of less than $ 1 billion. dollars. This is to ensure that small credit institutions have the opportunity to lend to small businesses, thus providing increased opportunities for many entrepreneurs, ”said Ashley D. Bell, regional administrator for the SBA and entrepreneurship policy advisor for the White House Opportunity & Revitalization Council in an SBA press release.
Initial funding of $ 349 billion for PPP loans dried in less than 14 days due to high demand. PPP loans are intended to provide up to $ 10 million in forgivable loans to small businesses affected by the COVID-19 pandemic.
The new bill, which passed on April 24, 2020 and is known as the Paycheck Protection Program and Health Care Enhancement Act, aimed to correct some of the distribution inequalities by setting aside $ 30 billion just for community lenders, small banks and credit unions. An additional $ 30 billion is allocated to medium-sized banks and credit unions.
Critics say the bulk of the original package, which was created with the president signing the CARES (Coronavirus Aid, Relief, and Economic Security Act) Act and started accepting requests on April 3, 2020, was falsely distributed to large companies through large banks and that companies that had access to other forms of capital were not to whom these loans were intended. The backlash stimulated several PPP loan recipients publicly declare that they are repaying their PPP funds, including Shake Shack restaurants, AutoNation Inc., and the Los Angeles Lakers.
For those who applied via small banks or non-bank lenders, this news could be the blessing they were waiting for on their languid nominations. But only if the staff they applied to are willing and / or able to work after hours and overtime on last minute notice.
“It’s great that the SBA has recognized that small credit institutions have difficulty entering their applications through the online portal system, but an eight-hour window advertised on the same day when the time is past. Office hours seem a bit hit and miss when we’re talking about creating equitable access for struggling businesses in underbanked communities, ”says Amanda Ballantyne, executive director of The Main Street Alliance, a small business advocacy group.
In its press release, the SBA said it would assess, together with the Treasury, whether there should be a similar dedicated window for smaller institutions in the future.