Banks face rush in aid requests
Federal loan program aims to help small businesses
The nation’s banks were still receiving guidance last week on the $349 billion federal loan program aimed at helping small businesses stay afloat during the COVID-19 pandemic.
On Friday morning, the floodgates opened.
“We received some of the guidance Thursday night with how banks could actually use the program,” said J.T. Thurston, a spokesman for the Ohio Bankers League, a trade association representing more than 170 FDIC-insured financial institutions.
By the next day, many banks received waves of applications, but some were still trying to check regulatory boxes to be able to participate in the program, Thurston said.
To access the loan system set up by the U.S. Small Business Administration, banks must already be approved in the agency’s primary program for providing financial assistance to small businesses, Thurston said.
That applies only to about 1,800 of the 5,500 banks in the country, Thurston said.
“That’s causing some capacity issues with the system,” he said. “There are some banks out there that are already lending, and that number is increasing all the time.”
Dennis Doll, president of Reliance Bank in Altoona, called the initial response “significant.”
“We’ve received probably about 150 so far,” he said.
“We have submitted a lot of applications to SBA and are awaiting their response,” Doll said. “We submit them, and they send us a confirmation back and then we go about getting the funds into our customers’ hands.”
Doll said the SBA is being overwhelmed with requests.
“The challenge is the SBA normally does about $30 billion in loans in one year,” he said. “Now they are asking them to close 10 times that amount in a couple of weeks. The system is overloaded. They will get through this.”
Doll said Reliance “is taking care of our existing customers first. After that initial surge, we will be happy to help any new customers.”
Created by Congress with the recently passed C.A.R.E.S. Act, the Payroll Protection Program provides loans mainly for businesses with 500 or fewer employees that were in operation in 2019 and through Feb. 15 of this year.
The maximum loan amount is 2.5 times the business’ monthly payroll, and the loans have no fees. At least 75 percent of the loan must be used for payroll.
If businesses show the money went to retain or rehire employees and pay some overhead expenses through June 30, the loans will be fully or partially forgiven, the Associated Press reported earlier this month.
Investment Savings Bank of Altoona is not an SBA lender, but CEO Donald Rhodes III said his bank is “exploring third-party relationships to assist these small businesses that desire Paycheck Protection Program lending.”
“We are working diligently with those experiencing financial hardship related to COVID-19 in the form of payment relief via modifications and extensions to loans, and encourage any of our customers that may be affected to contact us,” Rhodes said.
Rhodes added that community banks are participating daily on calls with regulators, senators and congressmen, and “we are doing everything we can to remain out in front of these changing times.”
Evan Bevins can be reached at localnewsmatters@ogden news.com. Walt Frank of the Mirror contributed to this report.