Get all the latest news on coronavirus and more delivered daily to your inbox. Sign up here.
Continue Reading Below
The second round of coronavirus small business lending that kicked off Monday was met by a tsunami of applications that are about double the initial round submitted for the Paycheck Protection Program.
The 'unprecedented demand' clogged the E-Tran, the lender’s portal to submit requests for small business relief funding, a senior Small Business Administration official told FOX Business.
"SBA is actively working to ensure system security and integrity while loan processing continues," the SBA official explained. "SBA is working around the clock to help all U.S. small businesses during these challenging times"
The rush for cash combined with the technical issues hit the community banks the hardest.
FOX Business received multiple reports that the relaunch of the SBA’s PPP caused banks in the Midwest and along the West Coast especially to complain that access to E-Tran had been throttled since the site opened at 10:30 a.m. ET.
The Consumer Banker’s Association even tweeted about the issues plaguing the re-launch hours later.
An SBA spokesperson says the site was not malfunctioning. Rather, the site was “pacing” applications to ensure fairness and equitable access to both large and small banks. Lenders were notified of the change on Sunday by letter. The updated guidance also included measures to limit funding based on asset size.
"Due to the unprecedented demand for Paycheck Protection Program loans by the nation’s small businesses and to ensure equitable access and system integrity, SBA and Treasury are taking prudent and reasonable steps to protect SBA’s loan systems for the next phase of PPP loan processing," an SBA spokesperson told FOX Business noting, “The pacing mechanism prevents a lender from submitting thousands of loans an hour into the E-Tran system. If a lender goes above the pacing limit they will get timed out.”
Small banks also complained larger lenders were able to submit applications in bulk, requesting loans on behalf of 15,000 businesses, while smaller lenders were limited to a single application at a time. The SBA modified the bulk processing threshold to 5,000, though several smaller bankers question the need for a minimum at all.
SBA and Treasury are implementing the following measures:
- Pacing the number of loans processed in the E-Tran system for round two
- Instituting a maximum dollar amount at 10% of PPP funding authority that any lending institution will be able to originate, exclusive of the additional $60 billion preserved for lenders with assets under $50 billion (i.e. $60B cap)
- Implementing operational standards to ensure that lenders access PPP funds based on their asset size
- Ensuring the PPP continues to operate on a first-come, first-serve basis so that every small business has access to PPP loans to sustain their business and retain their employees
Sen. Marco Rubio, R-Fla., tweeted a video addressing issues with the problems with E-Tran ensuring lenders the system “had not crashed.”
As of 3:30 p.m. ET today, SBA has processed more than 100,000 PPP loans from more than 4,000 lenders.