In an effort to stave off the big banks from siphoning the majority of the fresh $310 billion in Paycheck Protection Program (PPP) funding, the Small Business Administration (SBA), which is overseeing the PPP program, released a statement April 29, 2020 that smaller financial institutions would have an exclusive window of time to submit their clients’ loan applications.
“I am proud to share that beginning today at 4 p.m. through 11:59 p.m. (ET), SBA systems will only accept loans from lending institutions with asset sizes less than $1 billion dollars. This is to assure that small lending institutions are provided the opportunity to lend to small businesses providing increased opportunity for many entrepreneurs,” said Ashley D. Bell, SBA Regional Administrator and Entrepreneurship Policy Advisor for the White House Opportunity & Revitalization Council in an SBA press release.
The initial $349 billion in funding earmarked for PPP loans ran dry in less than 14 days due to high demand. PPP loans are intended to provide up to $10 million in forgivable loans for small businesses adversely affected by the COVID-19 pandemic.
The new bill, which passed 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. Another $30 billion is allocated for medium-sized banks and credit unions.
Critics say that the bulk of the original package, which was created with the president’s signing of the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act and began accepting applications April 3, 2020, was wrongly doled out to big businesses via big banks and that companies who had access to other forms of capital were not who these loans were intended for. The backlash has spurred multiple PPP loan recipients to publicly say they’re returning their PPP funds, including Shake Shack restaurants, AutoNation Inc. and the Los Angeles Lakers.
For those who have applied through smaller banks or nonbank lenders, this news could be the boon they’ve been waiting for on their languishing applications. But only if the staff where they applied is willing and/or able to work after hours and overtime on last-minute notice.
“It’s great that SBA has recognized that small lending institutions are struggling to get their applications in through the online portal system, but an eight-hour window announced the same day, when the time is after business hours seems a bit haphazard when we’re talking about creating equity in access for struggling businesses under-banked communities,” says Amanda Ballantyne, executive director of The Main Street Alliance, a small business advocacy group.
In its press release, the SBA indicated that they, in conjunction with the Treasury, will evaluate if there should be a similar dedicated window for smaller institutions moving forward.