(CN) — By all accounts the second round of funding for small-business loans has gone far better than the disastrous first, but many community banks and mom-and-pop stores still feel sidelined by the big banks and companies.
Johnny Yoon, who co-owns the Plaza Cleaners laundromat in northern New Jersey, has had a difficult time getting his calls returned, let alone a loan.
“The bank says, ‘please don’t call the bank branch,’” Yoon says. “I’m not blaming them. They are just a cog or managers handling daily business.”
Because spring and summer are typically the busy seasons in his business, Yoon says getting a loan is a matter of survival. “If this goes for more than three months, I won’t be able to pay insurance, rent or utilities,” he said.
Offering loans of up to $10 million with the potential of never paying it back, the Small Business Administration’s Paycheck Protection Program initially started as a lifeline for outfits like Yoon’s that are struggling under various controls being enforced to slow the spread of the novel coronavirus. The program was plagued by technical glitches, regulatory loopholes and a lack of guidance, however, and saw its $349 billion reserve evaporate in a matter of days.
Congress eventually allocated $310 billion in a second round of funding, with $30 billion set aside specifically for community banks, but many of those banks continue to struggle processing applications.
“It’s ridiculous,” said Scott Cote, chairman and CEO of Pentucket Bank in Haverhill, Massachusetts. “Tons of lenders across the country were just sitting in front of their computers.”
During the first round of PPP funding, before the money ran out, Cote’s bank processed 300 loans worth more than $50 million.
About 100 applications were left in the queue for the second round, and Cote said his staff stayed up until 3 in the morning Monday to finish the backlog of applications after they were told at the last minute that the SBA could not accept applications until 10:30 a.m. Monday morning.
According to numbers by an SBA spokeswoman, the agency had processed $52 billion in total loans under the second round of funding, about $29 billion of which was from small lenders, as of Tuesday.
“They outsmarted themselves,” Cote said of regulators, noting that the $30 billion carveout for smaller banks was hampered by bigger banks’ submitting applications simultaneously. “They should have had had the smaller banks go first, instead of painting us with the same broad brush.”
As with the first go-round of PPP funding, technical issues seem to be at the heart of the snags. “They were allowing [large] banks to input 15,000 applications in a single XML file,” which then slowed down the process considerably, Cote said.
To contend with the logjam, the SBA announced Wednesday it would allow only lenders with less than $1 billion in assets to access its lending portal.
Other community banks have adapted their own systems to ease the process. Peapack-Gladstone Bank has processed more than 2,000 applications — including 155 left over from the first round before it ran out of money — but the process is much speedier than before.
Vince Spero, executive vice president of the boutique New Jersey bank, attributes much of that to the bank’s change of lending platforms. Whereas before the bank had to manually input applications during round one, it was able during round two to pre-load applications into the queue and then hit send once the SBA’s systems went live.
“Yesterday we got just as many loans approved in 14 hours as in 14 days,” Spero said on Tuesday.
Noting about 80% of the bank’s PPP loan approvals have been for $350,000 or less, Spero estimates that larger companies are more prepared with their applications than smaller ones are. “A lot of these are just smaller businesses that are just trying to stay alive” and didn’t have the required forms ready, Spero said.