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SBA COVID-19 Relief Loan Program Requires Patience

SBA COVID-19 Relief Loan Program Requires Patience

Small businesses, including many smaller ad agencies, creative studios and marketing firms, were among the many small businesses seeking help to keep their businesses open and employees paid via loans under the 2020 CARES Act. The Paycheck Protection Program went live on April 3… but problems are rife.

Tech Glitches and Bank Fears

The New York Times has reported that loan applicants were being denied loans based on not already having loans or lines of credit with their banks (i.e., the banks hadn’t previously vetted their businesses as good risks). The Small Business Administration (SBA) is itself struggling with too few people, an aging website, and the high demand for disaster relief CARES loans.

The application process has been a major issue, as online applications have had to be downloaded and mailed or emailed because the website couldn’t handle the massive numbers of applications. Banks reported it was taking more than an hour to submit a single application online, with multiple system crashes and freezes. At one point on April 6, the system appeared to have frozen completely for over an hour. The SBA has been working hard to upgrade their aging systems.

In addition to technology problems, instructions on how banks should submit applications and receive SBA loan monies weren’t sent to banks until the night before the program was opened for applications. Banks report a clunky forms-and-approvals process, hours-long waits to connect with SBA people via phone, and limited logins per bank, all slowing the process. Banks are understandably jittery about legal issues should they approve loans without a firm approval and guarantee from the SBA; some fear the SBA could turn down already-fulfilled loans over technicalities in completing forms.

The New Not-Normal

For perspective, the SBA would back about $30 billions SBA loans in a high-demand year; right now, they’re trying to handle that kind of demand daily. So far, some 178,000 loans and $50 billion in relief money have been approved, but very little has reached the businesses desperately needing it; banks that have the money are being slow to release it.

Another complexity is that the SBA wants lenders not previously offering SBA loans to participate to help speed loans to small businesses, but the system is not set up to work with those lenders. The SBA partnered with Amazon and an unnamed “systems integrator” to set up a site for those lenders. The Times was told that site went online on April 7.

U.S. Treasury Secretary Steve Mnuchin keeps telling newscasters that the money is on its way, and Congress is already considering apportioning more money to the SBA. At the same time, Mnuchin has said loans will be issued on a “first come, first served” basis. Small business owners are understandably panicked about not having access to desperately needed federal relief dollars.

As with everything related to the Federal government, patience is required.

There Is Still Time to Apply

If your small ad agency has not already applied for a relief loan, work with your banker to help with the application process. You may find the New York Times FAQ on SBA relief loans helpful. In the meantime, build a backup plan. This may mean making tough decisions about layoffs, adjusting expenses and being firm about collections.

Stay positive. Call Second Wind if you need advice, and check out our#GoodAdvice interview with financial consultant Vince Dong on executing a “hurry-up offense” to manage finances and keep your business open. (See our videos on our COVID-19 Help and Resources Page.)

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