Coronavirus Stimulation: Banks Say Waiting For Small Business Lending Guidelines
Banks are asking the US Treasury for more advice as they prepare for thousands of businesses to dip into the government’s $ 349 billion small business lending stimulus package.
The payroll protection plan, part of the $ 2 trillion package signed last week, is aimed at businesses shut down by the coronavirus pandemic measures.
Reuters, citing anonymous sources, said big and small banks fear taking too much legal and financial risk without the right regulatory guidance.
Borrowers can apply for the loans from participating banks from tomorrow until June 30. The program provides businesses and nonprofits with up to 500 workers with loans to meet the need for up to two months of salary and operating costs. The government has promised to reimburse lenders for the canceled portions of the loans, which could represent most or all of the amount.
The speed with which the government wants to move money is making some banks wonder how they can meet the demand and at the same time meet the basic regulatory provisions against fraud. Among the concerns were the responsibility of lenders to prevent fraudulent claims by verifying the borrower’s eligibility while taking steps to prevent money laundering and terrorist financing.
Banks are also worried about facing regulatory penalties or legal fees, or being blamed if the process takes too long.
As noted by the Consumer Bankers Association, the Small Business Administration typically grants $ 20 billion in loans per year, while this program provides $ 349 billion in two months.
Consumer Bankers Association President and CEO Richard Hunt said banks “have been working tirelessly to support their customers since the onset of this pandemic.”
“We know that Americans are struggling physically and financially and are keen to ensure that aid funds authorized by Congress go as quickly as possible to small businesses and their employees,” Hunt said. “After receiving advice on how to implement a $ 349 billion program literally hours before it begins, we ask everyone to be patient as the banks move heaven and earth to implement a system and make it work to help America’s small businesses and the millions of men and women who work there.
The Bank of Regions, for example, has a page devoted to the program, where it is stated that “the federal government must issue regulations with specific execution instructions before these loans can be made”.
“We are communicating directly with our clients to provide details on the loan program and how to apply,” the company said in a statement. “Our bankers are preparing to expedite the SBA Paycheck Protection Program loan applications as quickly as possible, given the significant demand for these necessary funds.”
A spokesperson for BBVA said the bank was “committed to helping our customers and communities through this situation, especially our small business customers, as they are the lifeblood of the US economy.”
“We have always focused on small and medium businesses, and our position has not changed, especially in this difficult situation. We look forward to supporting them in any way we can and hope that guidance will be available soon from the SBA regarding this program, ”the bank said.
On Thursday afternoon, Treasury Secretary Steven Mnuchin told a press conference with President Trump that he would increase the interest rate on new small business loans from 0.5% to 1% for help make loans economical for banks.
“It’s going to take a little while, but we are committed to making it available tomorrow,” he said.