It’s 4 a.m. Tuesday, and Charlie O’Brien at Adams Community Bank, Shena Kelly at Coastal Heritage Bank, and Quincy Miller at Eastern Bank, are up trying to get loans approved.
So much for banker’s hours.
These lenders haven’t become night owls by choice. Instead, they have figured out that to outwit the US government’s achingly slow system that provides “emergency” loans to small businesses, they’re better off working in the middle of the night.
Kelly, a commercial portfolio manager at Coastal Heritage in Weymouth, pulled an 18-hour day Monday, but she couldn’t sleep knowing she had 30 more loans to process. Her customers, she said, are like family. After finishing up at midnight, she was back at it a few hours later.
“This money means a lot to them, and it is going to help them stay alive,” Kelly said, noting that her customers have her cell phone number — and use it. "‘Am I in yet? Am I in yet?’ You don’t want to let them down. You want to be able to come in the next day and say, ‘We got you in.’ ”
One of those anxious customers is Manny Costomiris, owner of Jimmy’s Broad Street Diner, around the corner from the main branch. His 72-seat restaurant is takeout only now. He had to let go more than a dozen employees, from busboys to servers. He worries the federal loan money will run out again, leaving Main Street businesses like him behind.
“It’s stressful,” said Costomiris. “The stories of billionaires getting bailouts … that is a no-no.”
In the race for federal loan money, this time it was bankers who were jockeying for position as they queued up hundreds of thousands of applications around the country for their clients. There was even more urgency this time with so many businesses left in the lurch after the first round of $349 billion was depleted in 13 days. Small banks, with their close ties to the community, in particular felt the pressure to deliver.
The Small Business Administration’s Paycheck Protection Program has been the centerpiece of the federal government’s rescue of mom and pop businesses. The second round of about $310 billion, released Monday, is expected to dry up soon.
The program has come under fire with allegations that some banks gave preferential treatment to big customers. Dozens of publicly traded companies were able to tap into funds, which are aimed to help firms with 500 employees or fewer. Much of the loan is forgivable if recipients rehire or retain workers.
Round 2 was supposed to be better. The SBA and Treasury ruled that public companies would “unlikely” be eligible for loans. The smallest businesses now have better odds with Congress carving out $60 billion specifically for community banks.
Those good intentions were promptly spoiled Monday morning when the SBA system kept crashing and kicking bankers out.
O’Brien is the chief executive of Adams Community Bank in the Berkshires and had about 150 small businesses counting on getting some of that money. Instead, he said Monday was “one of the worst days” of his 35-year career.
Even with five bankers assigned to handle the Paycheck Protection Program, the North Adams bank could only process two loans by 6 p.m. that day.
“The SBA leadership let banks down and let our customers down,” said O’Brien.
At Eastern Bank, about 40 bankers working from their homes and connected by Zoom were ready to hit the send button on about 2,000 loans. They were filing in batches of 25 applications, but even that was too much for the SBA system, which placed limits on the number that Eastern could process in an hour.
Miller, the bank president, estimates Eastern was only getting about 10 percent of its submissions through that day. Had the system been functioning normally, the bank should have been able to file all its loans in two hours.
Around 1 p.m., Miller decided Eastern needed a new game plan. Half of the bank’s loan officers would press on; the rest would knock off early, and then get up in the middle of the night to process loans.
Bob Nelson, Massachusetts director of the SBA, acknowledged that Monday was a “difficult day" for many lenders because there were so many applications, but said the process improved by week’s end.
One of the drivers of this Herculean effort is a sense among bankers that the PPP was an opportunity for redemption. A decade ago, banks were seen as the cause of the financial collapse that led to the Great Recession and put tens of thousands of people out of work or out of their homes. Banks were also among the few to receive a massive taxpayer bailout.
“This time around we want to be part of the solution,” said Miller.
With so many small businesses teetering on financial ruin, Eastern managers developed a mantra to remind everyone what’s at stake: “Every loan that we get done is one more business that can keep somebody employed. For every person who is employed, that’s a person who can keep food on their table for their family.”
At Coastal Heritage, Kelly and her team got through 50 loans by the end of Monday, but it was a slog, with community banks competing against massive institutions such as Bank of America that have the technology to submit huge batches of loans at a time.
“Monday we were all battling the robots of the bigger banks,” said Kelly. “It was really frustrating all day.”
Bankers contend that SBA loans are not a big moneymaker. But they do help build relationships with small businesses that could one day grow into big companies in need of more profitable loans.
But the banks have a real stake in keeping these businesses afloat, too. Some have outstanding loans, so it is in the banks’ interest to ensure they survive if they want these debts repaid once the crisis has passed.
“All these businesses do business with us,” said Don Gill, CEO of Coastal Heritage. “We’re in this together.”
The PPP is far from a perfect solution for the restaurants, shops, and other businesses felled by an intentional shutdown to contain a pandemic. But it’s the financial lifeline government came up with on the fly, a program that would help firms pay some bills and keep employees on the payroll. For both banks and customers, the rollout was rocky.
The sheer volume of loan applications alone tested many institutions. In Round 1, the SBA issued nearly 1.7 million loans in less than 14 days, the equivalent of what it ordinarily handles in 14 years. In Massachusetts, the agency issued about 47,000 PPP loans, a 26-fold increase from its lending in the state in 2019.
Eastern Bank is the largest SBA lender in New England. Even so, the bank anticipated that a tsunami of applications would require a massive response, and so it retrained some 100 employees to help process loans, pulling in people from human resources to technology.
“We had to deputize people across the bank who have never done credit and become underwriters,” said Miller.
Working into the wee hours, Eastern was able to process all 2,000 loans by midnight Tuesday. Over the course of both rounds of PPP, Eastern pushed through about 7,000 loan applications, totaling over $1.1 billion. That’s the equivalent of a decade’s worth of loans for the bank.
By Wednesday morning, persistence also paid off for Adams Community and Coastal Heritage, which were able to process all their loans in this round.
Nelson, the SBA director, said the success of PPP depends on banks stepping up — and many have. “These lenders worked their fingers down to the bone,” he said. “The banks really get that this is a short-term shot in the arm to help small businesses.”
Kelly, the Coastal Heritage banker, connected with Costomiris on Tuesday with the good news: the SBA approved his $63,000 loan. He can now bring back laid off employees.
“It’s a relief,” he said. “You have something to lean back on.”
Terryl Calloway also learned Tuesday that his PPP loan got approved during a phone call from Eastern Bank branch manager Judene Williams. But you didn’t need to tell Calloway, owner of Calloway Graphix Printing & Marketing in Boston, that his bankers have been in overdrive.
Several times over the past few weeks, Calloway said he noticed the lights still on at night at the Eastern branch in Roxbury Crossing. One time he even stopped and tapped on the door to say hello to Williams and her coworkers.
“I’m really thankful to God that I picked a bank that cared," said Calloway. “That really showed what community banking is all about. It’s not just the money, it’s the people.”
Shirley Leung is a Business columnist. She can be reached at firstname.lastname@example.org.