In a sign of just how broken the process is for startups looking to receive stimulus dollars, Silicon Valley Bank, the bank that claims "more innovative startups bank with us than any other bank," only just began processing claims today.
"Since the CARES Act and the PPP were announced, we have been hard at work advocating for our clients to have access to this funding. We have been working around the clock to develop a process that works for our clients. Thousands of companies have indicated interest in the last several days," a spokesperson wrote in an email. "We are currently accepting and processing PPP applications and continue to receive a high volume of interest. We will continue to listen to our clients and do everything we can to support their success."
The stimulus loans that startups hope to access were created to save jobs at companies affected by the government's closure of non-essential businesses. The initiative is part of a broad range of measures meant to "flatten the curve" of the COVID-19 epidemic.
For startup companies, the loan package has proven to be a source of nearly as much consternation as the government's response to the COVID-19 outbreak.
"I'm a startup founder who banks with Silicon Valley Bank," wrote one tipster. "They are totally dropping the ball on the Paycheck Protection Program. Other banks began accepting applications on Friday, it's now Tuesday and no word from SVB. Really bad for startups."
For its part, Silicon Valley Bank said it was working around the clock to make sure its customers were able to access the federal money.
Many companies and their investors are confused about whether they are even eligible for stimulus money -- and if they are eligible whether they should apply. Investors have refused to go on the record about the advice they're giving to their portfolio companies.
Perhaps the clearest view of the conundrum startups face has come from the Los Angeles-based investor Mark Suster who "open-sourced" his own firm's advice on how to approach the Paycheck Protection Loans — the $. 349 billion small business lending program at the heart of the CARES Act.
Still confused by the PPP Loan program? We've had to assist dozens of companies so I thought I'd just open-source what we've been advising after consulting with the NVCA, our lawyers at Cooley & numerous other VC firms.https://t.co/MBMOVqmD0i
— Mark Suster (@msuster) April 7, 2020
Small banks aren't the only ones having problems getting those much-needed stimulus dollars in the hands of the companies that desperately need them. Several businesses have been stymied in their attempts to receive loans through applications to larger banks.
Customers at Bank of America have reported being unable to apply for the government-backed loans from the program without having an existing line of credit with the bank.
And those aren't the only problems. The Small Business Administration, tasked with overseeing the loan process, is not equipped to dole out the nearly $2 trillion in government funds that are expected to flow through the agency.
“If you can’t get the loan today or tomorrow, don’t worry,” Treasury Secretary Steven Mnuchin said Tuesday on Fox Business. “There will be money. And if we run out of money, we’ll come back for more.”
Meanwhile, startup entrepreneurs are left holding the bag. And their concerns are warranted. Even by the standards of other financial services firms, the Silicon Valley Bank response was slow. The loans became available on Friday and SVB only started issuing loans on Tuesday of the following week.
When asked when SVB first made the loan applications available, the company said it started this morning.
"Due to the high volume, each company’s randomized notification of the ability to apply did not appear all at the same time," a company spokesperson wrote in an email.
It's a sign of a broader failure in the market. As one entrepreneur wrote in an email earlier today:
"Lots of startups (mine included) bank with SVB. The PPP loans are given out on a first come first serve basis - so their screwup might result in thousands of startups not getting these critical loans and we will have to lay people off.
SVB promised to have the program up and running by 4PM PST yesterday. At 5PM PST they put a weak ass message on their website (link below) saying they regret missing their own deadline.
There has been no subsequent communication from them and their phone lines are all disconnected. Relationship managers are not responding to emails or calls either.
LOTS of startup founders I know are furious, and rightfully so. We are going to lose 2.5x months payroll because our bank fucked up. It is ridiculous, and we would expect better from a bank that prides itself on serving startups. Main street banks like Bank of America and Chase had their PPP applications up and running on Friday (April 4th) but only for existing clients, so all of us startups who were dumb enough to rely on SVB are FUCKED. Switching to a new bank is not an option because a) all the branches are closed and b) the KYC process takes a couple of weeks, so it's too late."