Banks raise doubts small business rescue will start on time
Bankers are raising doubts about whether the US government’s $350bn loan programme for cash-starved small businesses will begin as scheduled on Friday, saying they have yet to receive proper application forms and other basic information needed to begin processing requests.
In a key plank of the federal economic response to the coronavirus pandemic, the Trump administration has invited businesses employing under 500 people to begin applying for rescue financing through their banks from Friday. The programme was enacted as part of a $2tn stimulus plan approved by Congress last week.
The tight timetable reflects the urgency of getting cash to businesses to prevent them collapsing under the strain of the pandemic, which has forced many companies to close their doors and left others with dramatically reduced trade.
Eric Rosengren, president of the Boston Federal Reserve, said banks in his district were struggling to help customers interested in applying. “At this stage, [the banks aren’t] able to do very much,” he said. “The details are not available for banks. Until you have the details up, you can’t do any of the underwriting or figuring out what the process will be.”
A senior executive at one large US bank said its teams had been working “24/7” since the scheme was announced, but preparations had been frustrated by a lack of information from government officials.
“At the most basic level, we have not been given the loan application clients are required to complete,” the banker said, adding that a version posted on the Treasury’s website “conflicts” with the legislation authorising the loan.
The banker said it was “highly unlikely” the scheme could be launched in time, though another person familiar with discussions between banks and the government said lenders were “still hoping” they can meet the deadline.
An executive at another large US bank described the plan as a “mess”. The executive added: “The infrastructure isn’t ready. It’s safe to say it’s going to be delayed relative to the very aggressive timetable [from the White House].”
Banks are also pushing back on what they describe as the cumbersome nature of the draft application form, arguing that disbursements could be slowed down by requirements to verify payroll and tax data that is not easily collectible.
Paul Merski, head of congressional relations for the Independent Community Bankers of America, an advocacy group for small banks, said his members did not know whether to use their own forms to document the loans’ creation or whether the administration would put out sample paperwork.
He added that loan officers needed to feel confident that if they collected the right documents, they would not be held liable if the loan application turned out to be fraudulent.
The Treasury and the Small Business Administration did not respond to requests for comment.
The White House has suggested the programme remains on track. “Small businesses are the backbone of America and Donald Trump has said we are going to take care of them in unprecedented ways,” Judd Deere, a White House spokesperson, wrote on Twitter on Thursday. “The White House, SBA, and Treasury, are all getting ready for tomorrow.”