PPP Loans Adding More Frustration Than Funding So Far

The Federal Reserve will sharply increase its purchases of short-term U.S. Treasury bonds in an attempt to ease anxiety and disruptions in the financial markets, according to an Associated Press report.
The U.S. Treasury building that is front and center of executing the CARES Act stimulus package. (Wikipedia)

The record-breaking $2.2 trillion stimulus package was due to inject $375 billion dollars into small businesses in need. That’s roughly 11.5k each if each of the 30.2 million small businesses registered in 2019 applied. However, while applause goes to how fast this legislation and process has been enacted, the opening of application on Friday, April 3rd has had its fair share of hiccups.

Lacking Clarity

First, let’s back up to Thursday, April 2nd when the final application form was tweeted out by Treasury Secretary Steven Mnuckin at 10:43 pm EST for applications due to be submitted the next day. This is nearly the equivalent of a teacher updating the study guide for the final exam the hours before students are due to take a test that could determine whether they can stay in school or be forced to drop out.

While the goal was clearly outlined of how much money was to be distributed, the language and specifics were still be ironed out leaving businesses stuck between their CPAs, bankers, and the SBA who were all having their own internal conflicts of outlining the process. Multiple banks were publically stating they still didn't have the required documentation from the SBA. The large banks were clearly dragging their feet which is ironic given the financial crisis of 2008 when many of them were bailed out in their time of need. Here we are 12 years later asking for their help to find more resistance than helpfulness.

Even with the last-minute updates and clarifications, the head of the U.S. Treasury tweeted out that 875,000,000 billion dollars had been processed by 12:30 pm EST on the first day. The application process opened for only some- notably Bank of America and many small community banks. It was surprising to see large bankers like Chase still on the sideline with webinars announced to walk their customers through the a process that still wasn't even live on their website. After suggesting they would open up applications at noon, then 12:30, it was then announced they would not be taking loans until Monday, April 6th. New York Law firm, Helbraun Level, communicated that TD Bank, Citizens Bank Peoples Bank, and M&T Bank also would not be ready until today, April 6th. Smaller, regional and community banks were the clear winners for many clients early on here given how quickly they were up and running compared to their larger colleagues.

 

 

Hitting Limits

However, even as Bank of America and other banks are taking applications, they are being flooded with so many loan applications, they are prioritizing who they would work with. First, it was their customers only and then later updated that they would only work with accounts who had previously had a line of credit in the past.

CNBC correspondence with the CEO of Bank of America said, 'that the bank would focus on borrowing clients' as a priority before working with other businesses. 

Wells Fargo has already shut down the PPP loan program after hitting its $10 billion cap. It's to be noted, that the NYPost reported that Wells Fargo received $25 billion during the 2008 financial crisis from the U.S. Government.

 

Donald Trump tweeted that he would ask Congress to refill the proverbial piggy bank if the funds do run out which looks like we are on pace to do in the next 24 to 48 hours at this pace. 

 

We'll continue to update this story as information becomes available.

 

 

 

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