Poor access plagues business loans

The latest revision of the Paycheck Protection Program appeared to be a victory for the most vulnerable small businesses, offering more generous relief to companies like solo ventures that were eligible for only tiny loans — or none at all.

If only they could take advantage of the changes.

President Joe Biden announced an abrupt overhaul two weeks ago to funnel more money to very small companies, some of which qualified for loans as small as $1 under the old guidelines. But the Small Business Administration updated its systems only on Friday, and with just three weeks before the program is set to expire, some lenders say there just isn’t enough time to adapt to the changes.

The result has been gridlock and uncertainty that have left tens of thousands of selfemployed people frantic to find lenders willing to issue the more generous loans before the program ends on March 31. (The House Small Business Committee is scheduled to hold a hearing today about the status of the Paycheck Protection Program.)

JPMorgan Chase, the program’s largest lender this year in terms of dollars disbursed, doesn’t plan to act on the new loan formula before it stops accepting applications on March 19. Bank of America, the second-biggest lender, opted against updating its loan application and said it would contact self-employed applicants to manually sort out their applications — but wouldn’t accept new ones after Tuesday.

“We have 30,000 applications in process and want to allow enough time to complete the work and get each client’s application through the SBA process,” said Bill Halldin, a

Bank of America spokesman.

Even lenders that will be offering the loans up to the congressionally imposed deadline were unable to reprogram their systems until the Small Business Administration officially updated the rules and began accepting applications with the revised loan formula.

“It just seems so arbitrary and chaotic,” said Paul Hastings, a self-employed graphic designer in Los Angeles who applied for a loan on Feb. 24, two days after Biden announced the changes.

Hastings applied through SmartBiz, a broker that farms its applications out to a network of lenders. He assumed his application would be automatically updated to take advantage of the new rules, but on Monday, he received a form letter telling him that his loan had been processed under the previous rules.

The letter gave Hastings two choices: Take the offered loan — for an amount thousands of dollars less than he would get under the new rules — or cancel his application and start over. But if he did that, the letter warned, he risked not getting any loan at all before the deadline.

“I don’t know what I’m going to do yet,” he said.

Representatives of SmartBiz did not immediately respond to a request for comment.

Aggrieved business owners have flocked to forums like Reddit to hash out their options and to swap tips on which lenders are using the new formula and which ones are not. “Desperate for Guidance!” one typical post reads. “Reaching out to see if anyone can help me figure out this absolutely monstrous failure.”

The disarray is compounded by the other major change Biden announced last month: a 14-day window, which ended Tuesday, during which the Small Business Administration would accept applications only from companies with fewer than 20 employees. The intent was to get aid to needy businesses, especially those run by women and minorities. The vast majority of those businesses are sole proprietorships that would benefit from the new formula, and many rushed to take advantage of the priority period.

UNPLEASANT OPTIONS

But the nearly two-week delay in implementing the more generous rules put lenders in a tough spot: They could pause applications from sole proprietors, creating a backlog they would later have to unravel, or they could approve applications under the previous formula, which would result in much smaller loans for their customers.

Biz2Credit, which has made more loans this year than any other lender, temporarily stopped accepting applications while it worked to adjust to the new rules. It plans to resume this week, said Rohit Arora, its chief executive.

Other large lenders — including Cross River Bank and Customers Bank, which round out the program’s top five lenders — said they had begun processing loans on Monday using the new formula.

Matthew Coleman, a spokesman for the Small Business Administration, would not comment on the time it took to update the rules, but said the changes “provide a stronger hand” to firms that were being left behind.

Even before the changes announced last month, lenders were trying to unravel extensive errors and data verification problems that had stalled tens of thousands of applications. It would take an act of Congress to push back the deadline, and lenders and trade groups are calling, with increasing urgency, for an extension.

The American Institute of Certified Public Accountants called the March 31 deadline for the overall program “unrealistic,” and 10 banking groups sent a letter to lawmakers last week urging Congress to give them more time.

The Biden administration has not sought an extension, but key congressional leaders have said they are willing to pass legislation that would push back the deadline.