The corona virus outbreak has disrupted businesses throughout the Sacramento area. Now, several of those businesses are applying for relief through the Paycheck Protection Program, but it hasn’t been an easy process so far.
“Paycheck Protection is a $349 billion program from the Treasury Department and Small Business Administration, or SBA. And it was created as part of the CARES Act last month,” says Sonya Sorich of the Sacramento Business Journal.
“The SBA is now acknowledging it was so overwhelmed with applications, its own system crashed.”
The CEO of Sacramento-based Golden Pacific Bank says the program rolled out so quickly that its start was characterized largely by confusion, for both borrowers and lenders.
“Virginia Varela says her staff arrived at the bank at 4 a.m. last Friday, the day the program launched,” says Sorich. “They found out, however, that at around 3:30 a.m., the Treasury Department said a different form needed to be used for the application. But Varela says by 8:30 a.m., that decision to use a different form was rolled back.”
Demand from customers was overwhelming.
“She says her phone was ringing every 10 minutes with calls from prospective borrowers on the program's first day,” says Sorich.
Because of that demand, Golden Pacific Bank - like many banks across the country - only processed loans for existing customers.
Meanwhile, Wells Fargo, the largest bank in the Sacramento region, stopped taking applications for the Paycheck Protection Program after the program's first day.
Its lending capacity for the program ran up against limits that regulators placed on the bank's balance sheet after Wells Fargo's fake accounts scandal in 2016.
“When Wells Fargo stopped taking applications, many of its small business customers were outraged, and even said they'd boycott the bank,” says Sorich.
On Wednesday, however, the Federal Reserve said it would temporarily ease Wells Fargo's regulatory asset cap so the bank can lend more under the Paycheck Protection Program.
“In response, Wells Fargo said it will expand its participation in the program and offer loans to a broader set of its small business and nonprofit customers,” says Sorich.
“We've spoken to a variety of small business owners across the Sacramento area, who have worked with different banks during this process,” says Sorich. “They've had varying experiences, but it seems like delays and confusion are common themes.”
“There are larger questions about whether the Small Business Administration is even up to task of responding to the coronavirus. Complaints about the program, which was created and deployed quickly, are mounting.”
The Paycheck Protection Program is designed to help small businesses get through the coronavirus outbreak. Loans made through the program would be forgiven for businesses that preserved jobs.
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