Small businesses had mixed results trying to apply for loans on the first day of an unprecedented and quickly arranged federal relief program, with some banks including Wells Fargo & Co. saying they weren’t ready as lenders across the country grappled with a lack of detailed guidelines from the government.
JPMorgan Chase & Co. started taking applications Friday afternoon after warning clients Thursday night that it was still awaiting guidance. Bank of America Corp. initially took applications only from its existing small-business borrowers but later said it would broaden its lending after that sparked criticism.
Friday was the first day small businesses could start applying for loans under a $349 billion program included in a $2 trillion stimulus package passed last month to shore up the economy.
Treasury Secretary Steven Mnuchin said more than 800 lenders, mostly community banks, participated on Friday and that he expects all big banks will be accepting applications in the coming week. He promised that if the fund runs out of money, he’ll ask Congress for more.
“I know there’s a lot of hardworking small businesses that couldn’t get their applications processed this week,” Mnuchin said on Fox Business. “They shouldn’t worry about it.”
Still, there have been at least 17,503 loans valued at more than $5.4 billion total, the Small Business Administration’s chief, Jovita Carranza, tweeted Friday night.
The rollout has been plagued by uncertainty, partly because of its magnitude and the urgency to get money to distressed small-business owners before they’re forced to shut down permanently.
The first applicants reported widely different experiences. Some got error messages when trying to apply online, another had been trying since 4 a.m., in vain, while two Bank of America small-business clients said they got through quickly and smoothly.
The National Federation of Independent Business, the largest group representing small businesses in the country, said it was hearing from too many that were shut out and called on lenders and the government to change that immediately.
“These small businesses did their due diligence and were ready this morning, but are hearing ‘no,”’ NFIB President Brad Close said in a statement. “The current delays are unacceptable, and hurt those that need the help most — very small businesses that find themselves in the worst of financial circumstances.”
Wells Fargo was not accepting applications as of Friday afternoon, according to its website. The bank is working “as quickly as possible to be ready to assist small business customers,” spokeswoman Kate Pulley said via e-mail.
Huntington Bancshares Inc. CEO Steve Steinour said Friday afternoon that the lender would be taking applications “momentarily” and expected to be “going seven days a week from now until June 30.”
The Columbus, Ohio, company has assigned more than twice its normal SBA staffing levels to work on the program, and Steinour said he’s expecting thousands of applications. Money should start going out to small businesses quickly, he said.
Lenders “have to make sure we’re fully complying with the guidelines,” Steinour said. “By the end of next week, we’ll be hitting a really productive stride,” he said.
The nation’s credit unions early Friday were still seeking guidance on how they can participate.
Some smaller banks also said they’re weren’t ready until they got more guidance about processing loans from the Treasury and SBA, the agency in charge of the program.
The initiative, called the Paycheck Protection Program, is meant to help small businesses keep workers on payrolls by offering loans of as much as $10 million with the portion used for payroll costs, mortgage interest, rent, and utility payments for two months forgivable if firms retain and rehire employees.
The number of Americans applying for unemployment benefits surged on Thursday and reached about 10 million over the last two weeks.
Wahid Nassar, who runs a restaurant in the Highlands, N.J., said he tried going online Friday to apply for the loan through Bank of America, but repeatedly got error messages. “There’s so much confusion and it’s hard to get a straight answer from anyone right now,” he said.
But Joseph Colangelo, chief executive of Boxcar Inc., a Chatham, N.J., startup whose app offers parking and bus service, had better luck. He said he found the application online, and since he was already logged into the Bank of America website, it took him only 10 minutes to complete.
The site said the bank would be in touch with him if it needed further information, he said.“It was so slick,” Colangelo said. “I was very impressed.”
At International Quality Consultants Inc. in Butler, Pa., CEO Gail Paserba was anxiously waiting to submit an application for a loan after seeing about half the company’s business stall. As of midday Friday, its financial institution, PNC Financial Services Group, needed to send an e-mail to continue the process, she said. Paserba said the company, which does inspections and audits for heavy industry, has been reducing hours for some its 67 employees but decided to pay them the full amount in anticipation of receiving federal aid.
Earlier in the week, there were doubts about how many lenders would participate because they originally believed they would be able to charge interest of as much as 4 percent and were dismayed when the government set the rate at 0.5 percent — a rate below many banks’ own costs of funds, said Julie Huston, chief executive of Immito LLC, an SBA lender backed by a nonprofit community development group. By Thursday, Mnuchin announced the government had bumped up the allowable interest rate to 1 percent.
Advocates for small businesses have also said the $349 billion won’t be nearly enough to meet demand, and that many bsuinesses — especially mom-and-pop shops that don’t have an established relationship with a lender — could get beaten out for funding. Some lenders have said they’ll take applications only from existing clients.
By one estimate, small businesses may need more than $1 trillion to replace lost revenue over the next three months, and some lenders believe as much as triple the funds in the loan program will be needed to meet demand.