(Bloomberg) -- The U.S. Small Business Administration, under pressure to dole out relief funds to mom-and-pop firms in dire need of cash, gave small lenders a dedicated time slot of eight hours on Wednesday to submit the applications on behalf of their clients.
The agency took the measure following outrage over larger firms, including high-profile restaurant chains, getting loans under the Paycheck Protection Program, or PPP, that is designed to shore up small businesses during the shutdowns because of the coronavirus outbreak.
The SBA is accepting only applications from lenders with assets of less than $1 billion between 4 p.m. New York time until 11:59 p.m. on Wednesday. The agency said in an email that it and U.S. Treasury Department “will evaluate whether to create a similar reserved time again in the future.”
The agency is seeking to improve access to its overwhelmed loan-processing system amid a flood of applications as the program relaunched Monday with an additional $320 billion after the initial round of $349 billion ran out on April 16. While trying to process an unprecedented amount of money in just days, the SBA has been facing complaints from all sides -- from business owners to bankers and lawmakers.
“We’ve pivoted, and we’ve made it very, very reasonable for all banks to participate in this program,” SBA Administrator Jovita Carranza said on the “The DeMaio Report with Carl DeMaio and Lou Penrose” radio program Wednesday.
The move was criticized by groups representing large financial institutions, but welcomed by community lenders.
After lenders of all sizes complained that the SBA system was inaccessible or kicked them out when the program restarted on Monday, the agency told lenders on Tuesday they could not use robotic systems to help submit applications so the platform “will be more reliable, accessible, and equitable for all small businesses.” The SBA is also limiting the number of applications any one lender can submit each hour.
A coalition of trade groups representing the interests of thousands of U.S. banks and credit unions urged the SBA on Tuesday to fix its application system or to explain the problems directly to entrepreneurs.
The data SBA has reported so far suggest small lenders are getting through. Of the almost $90 billion in loans from more than 960,000 applications processed as of Wednesday evening, more than $43 billion came from the smallest financial institutions -- including $30 billion that Congress had carved out for them to disburse -- and more than $20 billion from mid-size lenders, SBA said. Lenders with more than $50 billion in assets had about 167,000 applications processed worth more than $25 billion, according to the agency.
Kevin Fromer, chief executive officer of the Financial Services Forum, said the SBA blocking almost 800 banks from submitting applications during that eight-hour period will delay relief to thousands of small business owners who use large banks.
“A better solution would be a fully operational system that allows banks of all sizes to provide support to Main Street,” Fromer said in a statement.
The Consumer Bankers Association also criticized the decision.
“This I don’t agree -- many small businesses went to banks over $1 billion to help provide for their family,” Consumer Bankers Association Chief Executive Officer Richard Hunt said in a tweet. “There was already a carve out for small banks and now this. Don’t play favorites with small businesses. All need a lifeline right now.”
It’s a welcome attempt to get loans to the self-employed, independent contractors and smallest firms, according to Paul Merski of the Independent Community Bankers of America.
“It’s a smart move, particularly after the backlash of large businesses getting these loans,” Merski said.
Meanwhile, lawmakers are complaining that big banks and large companies are getting help at the expense of small firms and are calling for investigations. Democratic Senators Brian Schatz of Hawaii and Sherrod Brown of Ohio sent a letter to SBA and Treasury on Tuesday saying applications for loans of less than $1 million should be processed first.
(Updates with Carranza comment in fourth paragraph, statistics in eighth.)
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