Local bankers spent the weekend boning up on the $2.2 trillion CARES relief package Congress passed late last week, specifically the $349 billion small business loan portion of the package they will be administering.
Though the U.S. Small Business Administration will actually cover the loans and forgivable grants to businesses devastated by the coronavirus-imposed shutdown of the economy, local banks will be the first point of contact in the process. Local banks will be in charge of submitting applications to the SBA on behalf of clients and getting payments into business owners’ hands.
At the moment, there are more questions than answers about how it will work, and banks have little information from the feds, meaning businesses and nonprofits eager to take advantage of the program should be patient and prepare for a process that may not be seamless or smooth.
“We will start the process but we don’t have all the policies, procedures and paperwork,” says John L. Daniel, Greater Baton Rouge Region president of Hancock Whitney. “Nobody knows all the answers yet and we’re going to be inundated, so we know this week is just going to be tough.”
Even before the start of business today, Daniel says some organizations were calling, desperate for help from the package, which will enable qualified small businesses and nonprofits to borrow up to $10 million to cover various overhead expenses.
“We’ve had churches calling and saying they need to make payroll,” Daniel says. “They haven’t been able to hold services, so they can’t collect any money.”
B1Bank President Jude Melville predicts it will take several days for the “rules to catch up with public perception.” Until then, his bank will be talking with all its clients and doing preliminary paperwork so that once forms are finalized, loan applications can be submitted.
Though he anticipates the crush of applicants will keep local banks working round the clock—both in the office and remotely—Melville is confident his bank will be able to handle the workload. Whether systems at the SBA work that smoothly is another question.
“I’m assuming we’ll have to use the SBA’s IT system,” he says. “So if there is a danger of a bottleneck, the obvious risk out there in terms of delivering in the next two weeks it is their technology, and whether their processing system handle it,” he says.
Also unclear at this point is whether local lenders or the SBA will be in charge of determining whether the loans will need to be repaid or if they can be transitioned into forgivable grants, which is provision of the new law.
“From our perspective, the biggest unknown is who is responsible for that part of it,” Melville says. “But that’s something they will probably decide down the line.”
In the meantime, businesses seeking to take advantage of the program should call their local bank today and start the process, Daniel says, while also making sure they’ve asked for a 90-day deferral on any existing loans.
“Those are going right and left and they’re easy for us to grant right away because they’re loans within the individual banks,” he says. “They have nothing to do with the SBA.”