- Big borrowers will now have to contend with the government’s decision to only approve small business loans.
- The decision comes only days after the US Congress approved the lending program.
- Large borrowers have lambasted the state decision saying it would lock out over 800 businesses.
The recently established Paycheck Protection program (PPP) has come as a relief to small-scale businesses in the US. But financiers, especially the large banks will be forced to wait a little longer to benefit from the electron loans after the country’s Treasury and the Small Business Administration resolved to give priority to pop and small mom businesses.
The agencies have indicated that big banks will be temporarily locked out of the loan application portal for now, with the restriction only applying to lenders with more than a billion worth of assets.
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According to an email seen by CNBC, the state agencies want “to ensure access to the PPP loan program for the smallest lenders,” adding that SBA and Treasury will evaluate whether to create a similar reserved time again in the future.
The US government established The Paycheck Protection Program following the Coronavirus outbreak and is currently on its second round after the first batch of £280 billion got depleted within 13 days from the disbursement date.
Small businesses are required to enter their loan application details to SBA’s E-Tran system which then registers and processes the submission. The portal has however had some teething issues during both the first and the current round of funding, with bankers registering complains regarding the system’s unreliability and difficulty of use. The program has also been criticized for favouring the larger bank clients such as big restaurants and trading companies over smaller businesses.
Relief for small businesses
It now appears like the government is responding to complaints by the small-scale entrepreneurs. The responsible agencies are now reserving blocks of time for the smaller lenders while blocking the big banks to increase the odds of approving loans for smaller-scale lenders.
In a statement, the Small Business Administrator Jovita Carranza and US Treasury Secretary Steven Mnuchin indicated that “in addition to ensuring access for the smallest lenders, we expect that providing this reserved processing time today will enhance the SBA’s loan system performance for all users who submit loans outside of this time frame,” CNBC reported.
But the big lenders have come out to chide the move, with Financial Services Forum President Kevin Fromer saying the discrimination would lock out about 800 banks from the loan program.