Banks forego PPP lending
At least three The Intercept has learned that major banks have decided to turn down a new process to get Paycheck Protection Loans waived directly by the Small Business Administration.
Bank of America, JPMorgan Chase and PNC have decided to opt out, according to emails to The Intercept.
They are key players in the program that Congress launched to offer businesses loans for payroll and other skilled expenses to help them weather the closings. away end of May, JPMorgan Chase was the leading PPP lender, followed by Bank of America in second place; PNC is number 11. All in all, lenders who account for only half of all outstanding PPP loan applications have chosen it, according to SBA.
PNC recently emailed Jesse Grund, owner of the Unconventional Strength personal training studio in Orlando, Florida, saying we will be opting out of using the SBA’s procurement portal. “
Reason, his $ 5,000 PPP loan has still not been granted. Instead, he was told by PNC that his “correct maximum loan amount” was only $ 917, which left him hooked for the rest. “It’s PNC’s fault I have this money,” he said. “Now you want to take me back for that.”
At the start of the pandemic, small business owners were encouraged to join the paycheck protection program. The loans were issued with a promise that, if used appropriately, they would be waived and essentially converted into grants.
But many small business owners struggled to get their loans waived by the banks that issued them. The banks have been stimulated to issue PPP loans by the fees they generate, but they are not receiving fees to enforce the forgiveness and they have been dragging their feet. Of the total PPP loans granted less than the half are taken so far.
In response, the Small Business Administration, the government agency charged with running the program, announced In late July that it would offer small business owners who have taken out PPP loans of $ 150,000 or less a way to bypass relentless banks and seek forgiveness directly from the agency. The congress had once at the end of last year considered automatically waived all loans under $ 150,000 but never pulled through.
But there was fine print in the recent SBA announcement that many may have overlooked: banks must actually opt for the direct process for small business owners to access it. And at least three big ones turned it down.
“Forcing lenders to go through the process could have been disruptive,” SBA spokesman Terrence D. Clark said in an email. He noted that lenders continue to sign up and the agency is doing outreach to encourage them to participate. “[W]We speak to lenders every day, ”he said. In a statement, Patrick Kelley, SBA Associate Administrator for the Office of Capital Access said, “We encourage all lenders to sign up for this tested portal.”
When asked for an explanation of why the bank decided to exclude its customers from the SBA’s direct award option, a PNC spokesman pointed to a opinion that said “[L]Participants who take part in the SBA’s award portal are still responsible for reviewing and making award decisions to the SBA. We would therefore have to continue to ensure that borrowers meet the requirements for creditworthiness and loan waiver, regardless of whether we have decided to use the SBA waiver portal or not. “
Chase made no statement in his correspondence with his customers. In an email to a small business owner, it simply said: “[W]We are continuing our simple process and are not participating in the new SBA direct program. ”In response to a request for comment, a Chase spokesperson said via email,“ Chase customers should submit their requests for forgiveness through our platform, ”and added added: “We have a simple process that takes less than 10 minutes.”
For some business owners, exclusion from the SBA’s direct program could mean that some or all of their loans may not be waived. Some banks have contacted small business owners over the past few months telling them they shouldn’t have received the original amount they received – which the banks themselves approved – and asking owners to repay the difference. But many told The Intercept that they used the money right and fully expected that all of their loans would be canceled.
This is what happened to Warren Davis, the owner of fundraising consultancy Warren Davis Consulting, LLC, who received his loan from Chase and was recently informed that the bank would not seek forgiveness from the SBA directly. After the bank originally granted him a $ 6,812 PPP loan, he was later told that he was only entitled to forgiveness for $ 1,795.53. Now he has to pay Chase $ 460.01 on the first of every month, with two years to pay off the remainder of the loan. “This loan payment is next to my rent, which is also due on the 1st, the second highest payment I have now,” he said in an email. “I’ve tried many times over the months to get answers from Chase with no success.”
In response to situations like Davis’, the Chase spokesman said, “Small businesses must meet the standards to qualify for forgiveness, whether they go through their lender or directly through the SBA.”
When asked why Bank of America opted out, spokesman Bill Halldin said, “Because our portal has been simplified and has been in existence for six months,” added when the bank opted out, “we have to develop a new interface.” The bank is looking into joining the SBA process, but “at this point, our simplified portal is delivering what people want,” he said.
But this portal doesn’t deliver what Amy Yassinger needs. Yassinger, owner of a music company that offers party bands for weddings in Illinois, was encouraged by Bank of America to apply for a PPP loan at the start of the pandemic. The bank helped her with the process, assuring her that their underwriting team would “make sure everything is solid,” she said in an email. She used the $ 38,730 to pay employees as though they were handling their regular events, despite widespread cancellations, and to cover some incidental expenses.
However, 11 months after she received her loan, the bank told her that she would only turn to the SBA for $ 2,436 for forgiveness. “It was one thing to have completely burned my life out for over a year as my company was forced to cancel or postpone over 60 events in 2020,” she said. “It’s another that Bank of America wants $ 36,000 back out of $ 38,730 over the next 5 years.”