Scram Big Banks: Small Lenders Take Over SBA Lending Program (For A Night)
The Small Business Administration on Wednesday will temporarily allow only the smallest financial institutions to access the small business coronavirus relief program, known as the Paycheck Protection Program.
The move to restrict access comes after concerns that the smallest of businesses, and particularly those owned by people of color, were shut out of the first round of the program, which ran out of money in 13 days.
From 4 to 11:59 p.m. Wednesday, applications for the PPP program will only be accepted from banks and other lending institutions with less than $1 billion in assets.
SBA Administrator Jovita Carranza announced the policy on Twitter, saying that the move is meant to "assist small community lenders and ensure their small business customers have access."
To assist small community lenders and ensure their small business customers have access to the #PaycheckProtectionProgram, today from 4 PM EDT - 11:59 PM EDT, @SBAgov systems will only accept loans from lending institutions with asset sizes less than $1 billion.— Jovita Carranza, SBA (@SBAJovita) April 29, 2020
The program gives small businesses loans that can be forgiven, provided that they use the money only for particular things, including spending at least three-quarters of it on payroll. Those businesses must apply through banks and other financial institutions, rather than directly through the SBA itself.
There has been public outcry over news that well-known companies had been approved for the forgivable PPP loans, while many smaller businesses were shut out of it.
The SBA also announced Tuesday night that it would be giving extra scrutiny to loan applications for more than $2 million.
Data from the SBA show that it approved more than 25,000 loans of $2 million or greater during the first round of the program's funding.
Shake Shack, the Los Angeles Lakers and news website Axios are among the well-known businesses who have given back PPP loans amid criticism of the program.
A new round of $321 billion in funding for the program opened on Monday. Overwhelming demand that day caused SBA's portal for banks to crash.