Courtesy of ZeroHedge
It took just four minutes before unprecedented demand swamped the Small Business Administration's second Paycheck Protection Program rollout, causing it to crash. Two days after Congress approved on Saturday another $310 billion in Small Business Administration Paycheck Protection Program loans after the original $349 billion in funding ran out in just a matter of days, lenders reported that they were shut out of the SBA’s system to apply for relief loans, a sign that the program that restarted Monday with additional funding is already overwhelmed and the system crashed. According to Bloomberg, just minutes after the SBA’s Paycheck Protection Program relaunched at 10:30 am ET, lenders complained they either couldn’t access the agency’s system or were being kicked out as they tried to process applications on behalf of small-business owners, said Paul Merski of the Independent Community Bankers of America. The platform went down four minutes after it opened, according to a person familiar with the matter."Bankers are sitting there refreshing their screen every 15 minutes trying to get in. It’s very frustrating," Merski said.CNBC's Dawn Giel tweeted that an industry source confirmed that the platform did open at 10:30 a.m. as planned, but was giving applicants an error message within four minutes.
The SBA notified lenders on Sunday that it would pace the rate of applications into its E-Tran system, meaning that all lenders should be able to submit at the same rate. The pacing mechanism prevents any one lender from submitting thousands of loans into the system at once, and a lender that goes above that limit will get timed out of the system, an agency spokesman said. Meanwhile, banks had warned applicants prior to the reopening that the funding could once again run out quickly.
Rob Nichols, president and chief executive officer of the American Bankers Association, said in a tweet that his member banks across the country “are deeply frustrated at their inability to access” SBA’s system. He said the association has "raised these issues at the highest levels,” and until they are resolved, banks “will not be able help more struggling small businesses."
The SBA said that "unprecedented demand" slowed e-Tran with more than 100,000 loans processed by more than 4,000 lenders as of 3:30 p.m, with CNBC's Kate Rogers adding that's "more than double the number of users accessing the system compared to any day during the initial round of the program."
The glitches from the rollout of the second round echo the first round of the program, when lenders were repeatedly locked out of the loan platform, even though as we now know the bulk of the money went to close clients of the major banks including hedge funds and public companies, who used up all the funds before any could be used for those who truly need it, such as small and medium – mom and pop – businesses. The initiative restarted Monday with an additional $320 billion after the initial $349 billion to support small business during the coronavirus pandemic ran out after just 13 days.
This time the money is expected to run out in just a few days.
As previously reported, bigger companies such as Shake Shack and the operator of Ruth’s Chris steak houses got loans but returned the money after a backlash. A spokeswoman for the NBA’s Los Angeles Lakers said on Monday the team qualified for a $4.6 million loan, and repaid it after learning funds had been depleted.
The initiative, which first launched April 3, was marred by delays and glitches after guidance on how to process loans wasn’t released until the night before, and many big banks weren’t ready to participate or held back until rules because clearer. Advocates complained that many small mom-and-pop shops were shut out as outrage built over larger, public companies and big chains getting funded.
Even before the first new application were met with broken websites on Monday, advocates were concerned the additional funding could also be exhausted in a matter of days, won’t be enough to meet demand, and might not reach the entities that need it the most. As Bloomberg reported previously, the SBA and U.S. Treasury Department have sought to avoid pitfalls from the first round. They issued new guidance last week reaffirming that companies must certify they were affected by the pandemic and telling large firms with access to other capital they shouldn’t apply — and that firms can return loans by May 7 without penalty. Hedge funds and private-equity firms were told they were ineligible.
To ensure access for all of the more than 5,000 lenders approved to participate in the program, the SBA announced on Sunday it’s capping loans from each bank at $60 billion and pacing the acceptance of applications while allowing lenders to submit them in batches, initially set at a minimum of 15,000 and revised Monday to 5,000 or more that must be submitted by 9 p.m. on Monday.