Small firms move to head of line
8-hour period reserved for community lenders, customers
NEW YORK — The smallest companies seeking coronavirus relief loans were moving to the head of the line one day last week as the Small Business Administration said that for an eighthour period it would accept loans only from small lenders.
The step was being taken to ensure that small community lenders, those with under $1 billion in assets, and their small-business customers would have access to the $310 billion program, SBA head Jovita Carranza said in a tweet.
There have been concerns about the nation’s smallest businesses being able to get loans because small banks — many of them with just a few hundred applications — have had to compete with big national banks submitting hundreds of thousands of loan requests. Carranza said smaller lenders would still be able to submit applications before and after the eight hours reserved for them.
News that big companies, including restaurant chains like Shake Shack and the NBA’s Los Angeles Lakers, had gotten loans in the first $349 billion round of funding also raised anger that well-financed companies had taken priority over struggling small businesses. Shake Shack, the Lakers and some other large businesses have since said they would return the money, and Treasury Secretary Steven Mnuchin said loans above $2 million will be audited to ensure that the businesses actually need the money.
Last week, banks including community lenders reported more success in getting smallbusiness owners’ applications for coronavirus relief loans into the SBA’s processing system known as ETran. Banks had been frustrated by the slow pace of submissions earlier last week, the first two days of the current round of funding.
The loans, part of the government’s $2 trillion relief coronavirus relief package, are intended to help businesses hit hard by the virus retain their workers or rehire those who were laid off. Thousands of businesses have been forced to shut down to contain the spread of the virus or have lost business as customers stayed home or cut their spending. The Commerce Department reported last week that the economy shrank nearly 5% in the first quarter, with consumer spending dropping 7.6%; the virus began spreading in the U.S. midway through the quarter.
Demand for the smallbusiness loans has been intense — a first $349 billion round of funding was depleted in less than two weeks with the SBA approving 1.7 million loans. Banks had thousands of applications ready when the current round began.