WASHINGTON (Reuters) – The U.S. government is pressuring major lenders to launch another round of a key federal pandemic lending program this week despite many unresolved issues, sparking an industry rush to prepare the lending platforms, said five people familiar with the discussions.
The Paycheck Protection Program (PPP) reopens to major lenders on Tuesday, with many major banks including JPMorgan Chase & Co, Wells Fargo & Co and Bank of America ready to start accepting claims, their representatives said. .
But with dozens of changes to the government’s rules and technology system, the latest cycle is much more complex. Some industry executives fear government pressure to launch with so many unresolved issues will cause a repeat of the paperwork and tech glitches that hampered last year’s launch.
While the program has helped millions of small businesses, the problems of the past year have helped some needy borrowers miss out as some ineligible and fraudulent businesses have secured funds, watchdogs said.
A spokesperson for the Small Business Administration (SBA), which jointly administers the PPP with the Treasury Department, said Congress expects the latest round to be launched quickly to provide money to businesses in the need as quickly as possible.
“The SBA, in consultation with the Treasury, is working tirelessly to meet this desire of Congress … and urges lending partners of all sizes to continue helping eligible small businesses,” he added in a sent statement. by e-mail.
On Friday, the industry was circulating an eight-page document, seen by Reuters, containing questions about the rules, required documentation and technology processes.
“Everyone tries to go really fast… but it’s just really hard to launch a $ 300 billion program in a few weeks. People are struggling, ”said Dan O’Malley, managing director of Numerated, which provides PPP loan processing software to banks.
“The SBA and the Treasury grow because of economic need. They are just trying to do the right thing, ”he added.
Officials last week contacted major lenders to ensure they would start accepting applications on Tuesday, one of the five said, who requested anonymity. Another person familiar with the talks said officials are also keen to get as much money as possible before Democratic President-elect Joe Biden takes over on Wednesday.
“The Treasury is pushing for the system to be open. It’s the outgoing administration (Trump) that wants to take the credit, ”the person said, adding that many major lenders wanted two more weeks to prepare. Treasury spokespersons made no comment.
Under the program, lenders provide loans that must be repaid by the government on the condition that the borrowers spend the money on qualifying fees.
Last year, lenders issued 5.1 million loans worth $ 525 billion. As the pandemic spans a second year, Congress has granted $ 284 billion in additional funds and changed the rules on borrowers and eligible expenses.
Richard Hunt, chief executive of the Consumer Bankers Association, said the industry had “dedicated thousands of bank workers to making the process as efficient as possible.”
In addition to the rule changes for first PPP loans, borrowers will be eligible for a second loan provided they can show a 25% impact on their income. To address the technology capacity issues seen last year, the SBA has introduced a new loan application technology platform for lenders.
Combined, lenders say these changes represent substantial changes. Outstanding questions on Friday ranged from how to calculate the number of employees, what income documents are needed and how precisely lenders should review them, how affiliates of borrowers should be treated, and what requirements to pay. cancellation of loans, according to the document and sources.
The second source familiar with the discussions said more time to iron out wrinkles could help alleviate “bad behavior.” But the industry’s leading source said with so much confusion over who was eligible for a second loan, he was more concerned that the SBA would reject the applications.
Still, some small lenders who went into operation last week noted that they had had more time to prepare than last year and that their experience so far had been positive. Another industry source said the big banks tested their systems over the weekend and were “cautiously optimistic” that Tuesday would go smoothly.
Additional reports from Pete Schroeder; edited by Jonathan Oatis