“I haven’t heard anything yet ... I’ve been on hold with them so many hours just to hear that they don’t have any information for me,” she said. “I’m Caller No. 2,145 today.”
Like many business owners, Scott is in a state of limbo as she awaits word from the Small Business Administration on the status of her loan. The EIDL program is one of two federal assistance options meant to provide a lifeline for small businesses impacted by COVID-19.
The SBA is doing all it can to dole out funds, but the sheer volume of applications has caused a delay, said Marta Gomez Frey, director of the Collin SBDC.
“We are just asking for companies to have patience,” Frey said. “Keep trying to get updates ... keep at it and just hang tight.”
Scott also applied for the Paycheck Protection Program, which she said was more time consuming and required a different set of paperwork. She has not heard back on the status of that loan, either.
“I killed a small tree getting all of this stuff printed out,” she said. “It was all available to me, it was just a matter of getting it together.”
Over the weekend, Frey said she heard that some business owners had seen PPP funds deposited into their bank accounts. But while those payouts seem to be happening faster, the program comes with its own set of hurdles.
The federal government requires PPP loans to be processed through an approved lender. Prior to the coronavirus pandemic, few banks fit the bill, so once businesses caught wind of the opportunity, SBA-preferred lenders were flooded with applications, Texas Republic Bank President David Baty said.
“The phone was literally ringing off the wall Monday morning after it was announced over the weekend,” he said.
As a result, Baty’s bank had to limit applications to existing customers only.
“It quickly became necessary for us to communicate that that was our posture because we would have been overwhelmed,” he said.
The U.S. Treasury had intended for all banks to be able to process PPP loans, Baty said. But the approval process is not happening at a quick enough pace to keep up with the number of businesses in need of assistance, Frey said.
“They are just overwhelmed, and rightfully so,” she said.
While the process of vetting a businesses’ eligibility to seek a PPP loan takes much less time than the underwriting of a traditional loan, Baty said banks were not given enough information on how to facilitate the process. This slowed things down in the beginning, he said.
“The SBA and the Treasury really created a hardship for banks,” he said. “They said, ‘Hey, go get this money.’ But they weren’t telling us ... exactly what they wanted us to do and how they wanted us to do it.”
The lack of guidance, combined with messaging that loans could be forgiven but were also in limited supply, drummed up a frenzy that was hard to rein in, Baty said.
“All of that creates a stampede, and that’s exactly what was happening,” he said.
So far, Texas Republic Bank has approved about 150 loans with a cumulative total of about $20 million, Baty said. The average loan size is about $175,000, he said.
The lender has 10 days to close the loan once it has been approved by the SBA. Texas Republic Bank closed its first PPP loan yesterday, and Baty said he expects more applications to be finalized in the coming days.
“Now we are beginning to have the backend crunch of getting deals documented, borrowers coordinated on closing schedules, and getting them signed,” he said.
The process of applying for and receiving these loans may be cumbersome, but Baty said the ends justifies the means. The business owner whose loan Baty’s bank closed can now return his staff to full time status.
“It’s the very thing the program is intended to do: to stimulate payroll and maintain staff and all that,” he said. “And that’s what’s happening.”
For business owners still searching for a lender that will accept their application, Frey said to keep working the phones and checking the SBA’s website for guidance.
“It’s almost like dialing for dollars—you’ve got to make some calls and look around,” she said. “The SBA district office is trying to gather a list of lenders that are doing loans for non-clients, and that may be coming out soon.”