Small-business relief loan program rushes to launch, but Wine Country lenders seek answers before jumping in

Faced with the reality of branch phone lines and call centers already overwhelmed with inquiries from entrepreneurs desperate for Small Business Administration loans, a number of North Bay banks are delaying the start for accepting loan applications for the federal government's promised $349 billion in loan guarantees as part of the $2.2 trillion coronavirus relief package.

This uncertainty comes from not having sufficient SBA and U.S. Treasury guidance on how to administer this massive program, along with written confirmation that the loans they write will have federal payment protection.

'We're getting tons of calls and are taking applications via email,' said Julianne Graham, senior vice president with TriCounties Bank. 'Our plan is to follow up with each applicant while trying to work with the third updated version of the application. We are not funding loans right away.'

She said all banks are in the same boat, and that many changes are occurring on the fly. Treasury and the SBA are developing this program on the run. While banks are still trying to figure out the mechanics of this loan process as we wait for details.

'We are finding that many of our customers are nervous that the federal SBA money will run out before they get funded," Graham said. "The feeling out there is that this program was rolled out too soon and too fast. We're still trying to figure it all out.'

Brett Martinez, president and CEO of Redwood Credit Union, said, 'Everyone is worrying about getting a loan. While most banks are frozen, we're not one of them. While there are still many unknowns and a lot more information is needed, we are taking applications and have already successfully funded an SBA loan and received a confirmation code. We're getting hundreds of calls a day and are inundated with member applications.'

To cope with this volume, RCU is moving people around inhouse to help staff this business sector and only processing applications for SBA loans from among its 355,000 members — about 25%-30% of whom have small businesses.

'Since we already have existing business, consumer or deposit relationships with our members, it makes it easier to review their track record when it comes to qualifying them for an SBA loan when we also move them into the business lending category," Martinez said. "It's important to fully complete the application without leaving any blanks.'

He said it's going to take time to fund the volume of loan applications expected. While some have said these loans are not profitable for banks (at 1% interest), 'we're here to support our members and to fund as many of these loans as we can, while also knowing that across the nation the possibility of fraud may be high,' Martinez said.

RCU members are being directed to first go to the institution's website ( to download an SBA loan application, get background information and to also learn about how to file for unemployment claims and other services to ease the impact of COVID-19.

"We also offer 90-day deferment of all of our loans — with no balloon payment at the end of three months,' Martinez said.

CNBC reported that lenders are also afraid of incurring government fines tied to the execution of the program, as some did in the years after the 2008 financial crisis, according to Paul Kupiec, with the American Enterprise Institute.

'These loans are a minefield for lenders … chocked full of qualifying requirements that must be checked and certified,' Kupiec said.

Some attributed the lack of guidance to dysfunction between the SBA and Treasury over the process and forms, according to Brock Blake, founder of the small business loan marketplace Lendio.

'30 million small businesses will be beating down the doors for capital (starting) Friday. It's a disaster waiting to happen,' Blake said.

Word from Washington, D.C., is that Treasury 'may' provide further guidance by Friday afternoon, but no set time was mentioned, according to an area bank SBA loan manager who did not want to be identified. North Bay banks only received an outline of information needed to set up web portals on Wednesday, while being told more guidance was coming.

As a result, some banks are in a holding pattern. Banks want to receive definitive information on how to exactly manage the program, including how to apply specific rules associated with dispensing these forgivable loans.

'Our bank has handled SBA loans for years, but never on such a massive scale,' said a Santa Rosa-based bank employee who did not wish to be identified. 'We are not ready to tell our customers until details are clarified and steps in this process are clearly outlined.'

CNBC reported that JPMorgan Chase, the nation's biggest bank, was the first lender to announce publicly that it 'will most likely not be able to start accepting applications this Friday as we had hoped.'

The federal government had asked banks to begin disbursing $350 billion in forgivable loans just after midnight Thursday, and Treasury Secretary Steven Mnuchin said this week he would ask Congress for even more funding should this money run out.

Treasury's website was uploaded last Wednesday with a sample SBA loan application form. Since then, Treasury officials have told banks repeatedly that more guidance was coming.

On Thursday, Treasury issued a 31-page interim final rule on how the program would operate, which provided little time for banks to make needed changes ahead of Friday's start date.

CNBC also reported that as of mid-afternoon Friday, JPMorgan Chase and Bank of America are accepting applications from existing customers via websites the banks are establishing. The banks will get fees of 1% to 5% for the loans, depending on their size, and collect 1% interest if they are not forgiven after two months. That 1% rate was changed late Thursday from 0.50%.

Bank of America reported that more than 58,000 small businesses have asked for $6 billion in loans since 9 a.m. today.

As owners began applying, a U.S. Chamber of Commerce survey of 500 businesses showed the dire circumstances many face without a cash infusion. Fifty of the businesses said they were less than a month from permanently shutting down, and two-thirds said they were three to six months away from a permanent shutdown.

More than 100 businesses had already temporarily shut down when the survey was taken between March 25 and 28.

A small business advocacy group, the National Federation of Independent Business, criticized banks that weren't ready to accept applications or that created conditions that prevented some owners — for example, those who weren't established customers — from applying.

'Small business owners have had their applications filled out. When they run into error messages or their applications not being accepted, the frustration is palpable,' said Kevin Kuhlman, the NFIB's senior director of government relations.

Addressing such complaints on Fox Business News, Mnuchin said, 'I know there were a lot of hard working small businesses that could not get their loans processed. There is plenty of time. There is a lot of money left.'

Associated Press also contributed reporting to this story.

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