The Paycheck Protection Program (PPP) had a second chance for a smooth rollout on Monday.
Instead, the first day of applications for the small-business loan program's new $320 billion round of funding was just as messy as the program's initial launch on April 3, once again leaving struggling business owners across the country in financial limbo.
Much of the issue stems from new guidance issued by the U.S. Treasury Department and U.S. Small Business Administration on Sunday, which allows one-time bulk uploads of 15,000 loan applications or more per bank. The volume reportedly crashed E-Tran, the SBA's loan processing system, on Monday morning--denying access to many of the program's approved lenders.
An SBA spokeswoman sent Inc. the following statement on Monday: "Unprecedented demand is slowing E-Tran response times. Currently, there are double the number of users accessing the system compared to any day during the initial round of PPP. SBA is actively working to ensure system security and integrity while loan processing continues." By early-afternoon on Tuesday, the SBA said, it had been able to process more than 475,000 new loan applications worth over $52 billion.
Volume, however, isn't the only problem with the new bulk uploads policy. Experts say the move, while well intentioned, allows large banks to more easily process their applications at the expense of community banks and other smaller lenders, and incentivizes them to frontload their most expensive loans, pushing mom-and-pop businesses further down the queue.
"The next few days could be, once again, more chaos and confusion--and could leave more of the smaller small businesses left out again," says Greg Ott, CEO of Nav, an online platform that helps connect small businesses with lenders.
Ott estimates that once the SBA's loan processing system is running smoothly again, the new round of PPP funding could run out within one to three days, partly because of the businesses waiting for approval on loan applications from Round 1. There were 1.7 million such businesses, according to Neil Bradley, executive vice president and chief policy officer at the U.S. Chamber of Commerce.
"That confusion creates a lot of uncertainty for the small-business owners in the decisions they have to make, literally today and tomorrow, about how they're going to try and reopen, or keep people on staff," Ott says.
A second application and second guessing
Becky Straw, the co-founder and CEO of Brooklyn-based nonprofit the Adventure Project, applied for a $66,000 loan at Chase Bank during the first round of the PPP, but never received approval. Now, she's waiting to see if her loan will finally come through this week.
The stakes are high: Straw and her two full-time employees each took 40 percent pay cuts on March 10, and she's cutting operating expenses by 40 percent to keep the business afloat. She estimates she can only hold out another two to four weeks before further reducing payroll.
"It's hard to know how to make a decision one way or the other, because you don't know what order you are in the queue," Straw says. "I keep thinking in my head, as I lie awake at night, what else could I have done to get selected? They say they're trying to prioritize small businesses, women, and nonprofits. I'm all of those things."
Straw adds that her husband applied for a PPP loan for his 10-employee PR firm through Citibank a day after she did--and got approved within 24 hours. On Monday, she applied again through Seattle Bank, a smaller community bank. That's a smart strategy, says Bradley.
"My advice to you is: If you need the money, go ahead and apply. Hopefully, you get in with this tranche of money, but if you don't, maybe there will be another tranche," he told business owners on Friday in Inc.'s National Small Business Town Hall. "The one thing I'm pretty confident about is that there's going to be some type of additional support for small businesses."
Still, even if more relief is on the way, business owners can't predict when that might happen--or if they'll finally get lucky on their third try. For those like Straw who are already facing tough financial decisions, pinning their company's future on something so uncertain and time-consuming may no longer be a viable strategy.
"I'm a fighter and I'm not going to give up. I'm just going to keep begging and borrowing to ensure that we can keep supporting people," Straw says. "If that means I have to go without any pay, then I'll have to figure that out."