Small firms overwhelming local lenders with CARES applications
Local financial institutions have had all hands on deck helping local small businesses put together loan applications for assistance from the Coronavirus Aid Relief and Economic Security Act.
Specifically, the paycheck protection program provision of the act provides up to $349 billion in forgivable loans to small businesses to pay employees along with other costs over an eight-week period.
“We’ve gotten almost more than we can handle,” Greater Community Bank President David Lance said.
At this point they’re not aware of any limit placed on banks in terms of how much money is available for the loan program, Lance said.
Heritage First Bank President Ryan Earnest said they’re in the same boat.
“With the exception of our retailer teller staff, every member of our team is working to process these loan requests,” Earnest said.
The the number of applications the Coosa Valley Credit Union has taken in the first week is probably the greatest number of loans processed in any one week since the credit union opened in the mid-1950s, Saunders Jones, the chief lending officer at the credit union said.
The average loan request on applications filed through Coosa Valley Credit Union has been close to $50,000, Jones said.
Along with being inundated with requests as well, Scott Preston, the Northwest Georgia market president for Synovus Bank, said there’s only a limited amount of availability in the program.
“The Small Business Administration has communicated to several banks that they are processing about a billion dollars an hour in loans,” he said. “If you do the math on that, you’ve got $349 billion for the program.
That’s a little less than three weeks of availability.”
At the end of the first week, Preston said he thinks his bank has probably funded less than 10% of the requests.
“We’ve gotten the authorization numbers from SBA for most of them,” Preston said.
Number applications shows the need
“It’s been an unbelievable response and tells us how many folks are in dire need,” Lance said. “Greater Community Bank is trying to take care of it’s own customers who have applied for assistance first. After that it’s sort of first come-first serve.”
There is no shortage of desire to help, especially in local banks that not only do business but live alongside their customers. However, making sure that the banks file everything correctly and remain in compliance with the regulations of the new program takes some time, Earnest said.
Timing is of the essence only because the amount of money Congress appropriated for the program is not an unlimited figure.
There is some concern that sheer numbers from larger communities could eat away the funds before some small businesses decided they really do need the help and turn in an application, Earnest said.
“I think that concern is being alleviated by action in Washington now to provide additional assistance,” Earnest said. “I think it’s he administration’s desire to serve every small business through the program and I think they’re doing everything they can to make the appropriate provisions,”
That would be another $250 billion on top of the original $349 billion however Preston said the expectation is that the additional allocation would also be consumed pretty quickly.
“If the second round of stimulus gets passed in Congress, I think a lot of fears will be alleviated,” Jones said. “Obviously the demand for this help is going to exceed the supply.”