The Small Business Administration announced on Wednesday that it would temporarily stop big banks from submitting small-business relief loans on behalf of their customers in the hopes of helping smaller banks and smaller businesses access those relief funds instead.
“To ensure access to the PPP loan program for the smallest lenders and their small business customers,” the agency announced Wednesday afternoon, the “SBA systems will only accept loans from lending institutions with asset sizes less than $1 billion” for six hours Wednesday evening.
Lenders with more than $1 billion in assets will be able to submit loans again on Thursday after the reserved processing time ends. The SBA and the Treasury said there could be a need to reserve time for smaller lenders like this again in the future.
Some in the banking industry pushed back against the new rule. “This I don’t agree — many small businesses went to banks over $1 billion to help provide for their family,” said Richard Hunt, the CEO of the Consumer Bankers Association, which represents many of the country’s big banks. “There was already a carve out for small banks and now this. Don’t play favorites with small businesses. All need a lifeline right now,” Hunt said on Wednesday.
The agency has been under pressure to focus on smaller businesses after reports that dozens of publicly traded firms and corporations have claimed loans from the $350 billion pledged to small businesses, including chains such as Shake Shack and Ruth’s Chris Steak House, as well as the Los Angeles Lakers basketball team.
Treasury Secretary Steven Mnuchin said Tuesday that any small-business relief loan of more than $2 million would undergo a “full review” before it is forgiven by the government to ensure that help does not go to large corporations instead of the companies it was meant to aid in the pandemic.
The Small Business Administration’s relief program, called the Paycheck Protection Program, provides forgivable loans through lending institutions to small businesses that have been hurt by the pandemic as long as they maintain payrolls. The program was initially funded with $350 billion as part of the massive $2.3 trillion CARES Act relief package. The program was given an additional $321 billion last week after the initial funds ran out within just two weeks.
