SALT LAKE CITY — State and federal programs launched in the past week to help small businesses in distress amid COVID-19 economic fallout have received a tidal wave of response and, in the case of stimulus money, some serious functionality issues.
Last Monday, Gov. Gary Herbert announced the Utah Leads Together Small Business Bridge Loan program aimed at helping Utah businesses with 50 or fewer employees with 0% interest loans from $5,000 to $20,000 for up to a 60-month period.
The initial application window for the program closed Friday, and the state received almost 2,800 applications for funds by the deadline. Even at the minimum loan amount of $5,000, that number far exceeds how far the initial $8.5 million in funding for the effort would extend. While the money currently available for the program appears likely to be tapped out by the first wave of applicants, GOED representatives said last week they would also be seeking out additional funding from the Utah Legislature to extend the program.
A program funded with $350 billion of the mammoth $2 trillion federal stimulus package, the Coronavirus Aid, Relief and Economic Security Act went live last Friday but has been beset with issues since launch that were still being addressed on Monday.
Brock Blake is founder and CEO of Utah-based business loan marketplace company Lendio that works with hundreds of lending institutions. Blake said on a call hosted by tech advocacy group Silicon Slopes Monday afternoon he was hearing from banks that the U.S. Small Business Administration that’s overseeing the Paycheck Protection program had come to a screeching halt on processing loans, even though local lenders and credit unions originating the loans have submitted tens of thousands of applications representing tens of billions of dollars in much-needed emergency funding.
“We’re not aware of any loans that have funded yet,” Blake said.
Blake said there are also issues among the lenders themselves, with many banks choosing to opt out of participating in the Paycheck Protection effort and some banks offering loan processing to only select customers. And, lender concerns about maintaining capital to fund the loans is also exacerbating the challenges of a system that’s trying to allocate and disburse so much money in such an abbreviated time frame.
“A lot of banks are only focused on funding their own customers,” Blake said. “And sometimes they’re funding just customers who have received a loan in the past. But, another group (of lenders) want to fund as many customers as they can get but they are worried ... about capital.
“The demand for capital is so high right now, they might have $100 million on the balance sheet but they could go through that in a couple of hours.”
While loans issued under the Paycheck Protection program are already backed by the SBA, the Federal Reserve also stepped in with a position statement on Monday, thought by many to be a further encouragement to lending institutions that have waited out the program thus far to get involved.
“To facilitate lending to small businesses via the Small Business Administration’s Paycheck Protection Program, the Federal Reserve will establish a facility to provide term financing backed by PPP loans,” read the Federal Reserve’s press release. “Additional details will be announced this week.”
While many banks were still working to figure out if, and how, to participate in originating the loans, at least one major U.S. bank is already bowing out of the program, just two business days into the effort.
On Monday, Wells Fargo announced it was capping its lending participation in the Paycheck Protection Program at $10 billion and had already received enough applications to encumber that money.
The Paycheck Protection Program provides federally guaranteed loans to eligible small businesses in amounts up to $10 million and may be partially forgivable. The available financing can provide businesses that employ 500 or fewer with funds equal to 2.5 times the company’s average monthly payroll expenses. These loans are intended to help small businesses retain employees throughout and after the COVID-19 crisis with fund dispersal from the program happening on a first come, first served basis.
Utah businesses seeking guidance on how to participate in the Paycheck Protection Program can find further information at coronavirus.utah.gov/business/ as well as the Silicon Slopes’ Slopes Serves website, slopesserves.com/.