For the Small Business Association, the quick launch of the Paycheck Protection Program for businesses affected by COVID-19 home stay orders may be very similar to “drinking out of firehose.”
That was the impression shared Monday by Jeff Ellis, president of La Salle State Bank, about how quickly the SBA had to create an application portal. The US Treasury has demanded that the program quickly send money to business owners so they can get the money into the hands of their employees as quickly as possible.
Midland States Bank, based in Effingham, has 66 branches throughout the Midwest including Joliet, Dixon and La Salle, the bureau and Winnebago district, and is one of the banks that rose and operated on the first day of the program. Bank President Jeff Mefford said starting is not easy for banks, but the application process for business owners is not too complicated.
“We succeeded at the beginning of the process on Friday. We anticipate funding of some of these applications before the closure of business today, “Mefford said around 3:30 pm. Monday. He believes around 20 businesses will benefit from being processed on Monday, and the whole purpose of the program is to “help customers reach the other side” of the difficulties caused by the pandemic.
Many bankers have difficulty registering to process low-interest aid loans, in part because national lenders enter computer systems to register on the same day.
“It is a challenge to deal with the Small Business Association and the process. I don’t think they are ready to handle the volume they get, “said John McCormick, President and CEO of Eureka Savings Bank, La Salle. He said the SBA had staff shortages, at least in Chicago and Springfield, to handle the $ 349 billion national program.
McCormick said he spoke with 25 bankers, and all said they had a lot of trouble going through the process to get the bank approved as a lender in the program. He sent the application material three times, only to receive responses asking for additional information. On Monday morning, Eureka was approved as a lender to help business owners pay employees, and he jumped in to help around a dozen local business owners.
Chris Duncan, senior loan officer at La Salle State Bank, said the process was worsening for bankers, and the disruption with computer access to the SBA portal remained frustrating.
However, he said the majority of small businesses could benefit from this program. Duncan explained how it works, noting that 80% of aid loans must be paid to employees who pay for two months and the government wants business owners to use 20% of the two-year loans for utility, rent or interest before loans for mortgages or other increases. If business owners use funds for these things, the government will forgive a two-year loan.
Despite the initial disruption in the program, Duncan said it would be very good for many businesses because of the forgiveness aspect of the program.
He gave a scenario: If the owner has an average salary of $ 10,000 per month and is approved for a $ 25,000 loan, the government will first ask the owner to spend $ 20,000 of it for employees for two months. If the owner spends $ 3,000 on mortgages and utilities and has $ 2,000 left, the owner will be left with a $ 2,000 loan at 1% interest – an interest fee of around $ 1.67 per month, Duncan said. Plus, businesses can ask to defer payment for six months, which requires payment for the next 18 months.
“The key is to first spend it on payroll. You have to delete that part of the payroll to make the government happy, “Duncan said.
Concerns remain that larger businesses will advance from “mom and pop” stores. Duncan said JPMorgan Chase waited until this week to continue the program, so several small banks had a first step. However, there is a belief that as soon as the largest banks have a portal into the SBA application system, “They will suck up all the money.”
“I think the president eased that concern when he said when we ran out we would update it,” Duncan said, adding that he avoided being too critical of the SBA and the federal government. “I will give the Ministry of Finance small business association many opportunities because of the large program and the number of people who will benefit. … I think they have everything on the deck and there won’t be enough time for them to add staff as soon as this needs to be pushed out. “
Duncan worked all weekend to complete and submit around 30 applications to move some local businesses to the forefront of aid. He is working on 20 more applications on Monday.
“Our bank is approved and we have submitted an application,” Duncan said. “We think we can be at the forefront of the world by coming on weekends and getting more shipments. This program is launched on Friday; We were here at midnight Thursday night and Friday morning thinking it would be launched. We got access immediately after 4 pm. Friday.
Bob Cormier, executive vice president of Home State Bank, Crystal Lake, said bank staff had not experienced a blackout since gaining access to the SBA website. Ideally, banks want to get access on Friday mornings, but because the program is available, Home State bankers work on Friday nights and all weekend to process as many applications as possible.
“There is a lot of interest in this program because of the conditions of forgiveness,” Cormier said.
“I think there are some additional rules for exiting that make us uncomfortable,” Cormier said of the exact rules about how borrowers should prove and verify how they spend money. He understood that this was a new program, and the SBA had eight weeks to implement the rules. But ,: “I think the scary part for borrowers and us to some extent is you want to know the rules for forgiveness before you get money.”
to request modification Contact us at Here or [email protected]