The day of the launch of the much-vaunted $ 350 billion small business loan program got off to a choppy start on Friday, with technical issues with the websites of banks with opaque lending rules that appear to qualify hedge funds for help, while some cash-strapped local businesses were shut out.
“I know there are a lot of hard-working small businesses that haven’t been able to process their claims this week,” Treasury Secretary Steven Mnuchin admitted in an interview with Fox Business on Friday afternoon. “They shouldn’t care. There’s a lot of time, there’s a lot of money left.”
“It’s nothing short of a disaster. It has been confusing at every turn, ”said Grant Geiger, CEO of EIR Healthcare, who submitted a loan application on Friday.
Geiger said he tried to apply through his company’s main lender, Wells Fargo, but was told the bank likely wouldn’t be ready to start accepting applications until Monday. The website he was directed to turned out to be little more than a typo.
“Yesterday we had our things ready to go. I’m still sitting here with my candidacy, ”Geiger told NBC News. “We have a lead, but it doesn’t get us far. “
The banks had already sounded the alarm on Thursday evening, with senior executives from some major banks telling NBC News within hours of the launch, they were still waiting for the latest directives from the Treasury Department.
Even after the program launched at midnight on Thursday, borrowers found that there was no standard application process. While the Bank of America website rejected applicants who did not have a small business lending relationship with the company, Chase did not have the same requirement.
Bank of America started accepting applicants at 9 a.m., but Chase didn’t open online until 11 a.m. and then quickly crashed, before recovering soon after. Wells Fargo said it was “working as quickly as possible to be ready,” but by early afternoon it had not started to receive applications.
Social media quickly filled with complaints and dismay from disappointed small business owners.
“Are you kidding me @Bank of America with this requirement to have a credit card to apply for PPP? What type of scam is this. I have been a loyal customer for years with my business accounts. # Bankofamerica #PPPloan ” tweeted Melissa Perri, CEO of Produx Labs, a New York-based product management consulting firm.
Despite the problems, the Small Business Assistance Program received a wave of applicants. The BOA said it received $ 22.2 billion in claims from some 85,000 companies.
However, current and former government officials have warned and acknowledged that there are design flaws that could leave behind some of the companies most in need of help.
“It is absolutely concerning that the smallest and most vulnerable companies are not the first in the queue because they do not have the resources to prepare an application quickly,” said Karen Mills, senior researcher at Harvard Business School and former SBA Administrator.
When the rolling rules were first designed, companies had to show that they had experienced a 50% loss in revenue in the past year. These rules were later changed to be open to any business that expected their business to suffer.
The designers of the loan program recognized that there were improvements to be made and that the program should continue to evolve after it had already started accepting applicants and approving loans.
Senator Marco Rubio, R-Fla., Chairman of the Senate Small Business Committee, which originated the Senate version of the CARES Law on Aid, Relief and Economic Security (CARES), said the gaps were real and should be addressed. .
“There is the possibility here for some people to come in who are not the dry cleaner down the street, the bakery around the corner or the little restaurant that we are really trying to help,” he said. -he declares. One of the owners of a small business could be an investment fund, he said, noting that there may be exceptions, depending on their size.
“I don’t want to read the headlines that the well-funded, well-capitalized companies came in and were able to suck all the money and now we’re out of money and we can’t help the small business down. the street, ”Rubio said in an interview with MSNBC.
“This program is very important in determining whether the country is able to rebound quickly or get caught up in a quagmire,” said Austan Goolsbee, University of Chicago economist and chairman of the Obama administration’s Council of Economic Advisers. .
“If there isn’t enough governance and accountability to force worthy small businesses to shut down, and then we find out that undeserving high income small businesses or politically connected businesses are the ones who get the money … then it will be a credibility disaster for the program, ”Goolsbee said.