Paycheck Protection Program via SBA will be a flop

Funneling government funding the through the Small Business Administration (SBA) is going to be an unmitigated disaster. Neither the SBA nor community banks are set up to handle this type of volume.

From speaking with some folks in the know, responsibilities for the Paycheck Protection Program are flowing through the corporate lending departments of community banks, where these bankers have been prepping their well-heeled clients for the upcoming financial support. These lenders don’t deal, for the most part, with restaurant owners and other smaller businesses, the people who need the money fast and the most.

With little interest from these corporate lending departments, this massive loan demand is then being pushed to the people who work the branches, where they are rightly staffed at skeletal levels to prevent the spread of the virus. These people don’t have the authority to lend or the software applications to process such loans. One business owner visited a local community bank after being put on hold for three hours at Bank of America. There was nothing the community banker could do.

These loans should be distributed by institutions that distribute cash in volume – the payroll companies and credit and debit card companies. Fill out forms online and direct deposit the cash.

To show how difficult the SBA and community banking situation is, one president of a community bank on CNBC said they gave out the first SBA loan on Friday, mentioning they gave one loan. When asked about how many applied for loans, he said, 2,000. Hard to believe that a bank president could be that excited about giving one loan.

Written on April 5.

 

About Ed Mullane

Ed Mullane has been writing on business and economics for over twenty-five years. He currently writes for dealReporter, a Financial Times Group company. Much of his time is spent covering dealmaking in the technology, media and telecom industries.
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