Millions of small businesses are anxiously awaiting their slices of a $350 billion relief program that forms part of the government's $2 trillion economic support package. However, with just hours to go before launch, it wasn't until Thursday night that banks received their 31 pages of guidance from the Treasury Department on how to lend the money — and some haven't even decided whether they can participate on the opening day.
In a strongly worded statement, one of the nation's biggest lenders said the much-touted relief program for small business owners wasn't ready for prime time.
"Financial institutions like ours are still awaiting guidance from the SBA and the U.S. Treasury," Chase Bank said in an email to business customers, referring to the Small Business Administration. "As a result, Chase will most likely not be able to start accepting applications on Friday, April 3rd, as we had hoped."
The bank said it would post electronic updates on its website and Twitter account and send emails when it was ready to start participating.
"We are working hard so we can be ready as soon as humanly possible, " a senior Chase executive told NBC News, but with several regulatory hurdles, it was unlikely the bank could start processing applications by Friday morning.
At a White House news briefing Thursday afternoon, Treasury Secretary Steven Mnuchin maintained that the program is ready to go, and said he wasn't aware of the complaints. "We just put up the federal register with the new guidelines for lenders,” he said. “I've been assured that the banks will start lending tomorrow."
"It is a very large priority, we want to get this money quickly into your hands," Mnuchin added. He said the Treasury had spoken with the top banking leaders and received input, and has now simplified the application form.
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The application period for the Paycheck Protection Program administered by the SBA starts at midnight Thursday. The program promises relief for an estimated 30 million small businesses, providing eight weeks of cash flow and 100 percent federally guaranteed loans that could be completely forgiven if they use them to keep their workers employed. The money can also be used to pay rent, utilities and mortgage interest, with no collateral required.
However, as recently as Wednesday night, Bank of America CEO Brian Moynihan, the point person for the nation's top bankers for the measure, had a private phone call with Mnuchin to go through the plan line by line, senior banking executives told NBC News.
While Bank of America is cautiously optimistic, JPMorgan has expressed less confidence, according to senior sources at the bank.
The vacuum in guidance has left banking executives scrambling to cobble together a massive small business assistance program from scratch.
With millions of nonessential businesses shut down because of the coronavirus pandemic, revenue has dropped to zero for many operations. Weekly initial jobless claims skyrocketed this week to 6.6 million, eclipsing all previous numbers.
Small businesses say they needed the money yesterday and are hoping for quick relief — and millions are expected to apply on the first day. However, checks might not start going out for a week or more.
"It's utter chaos," said James Brower, a partner at Marks Paneth, a New York City-based accounting firm. "Business owners are clamoring for this money. They want to pay their people. They want to pay their landlord. There's this lifeline that's been dropped, but they keep pulling the rope back up to the helicopter.
"We're now hearing from bankers that they may not want to get into the program because the law doesn't have a whole lot of specifics in it, yet the phone lines are jammed with business owners begging for loan applications," Brower said. Banks "don't know what the rules are, and they're afraid if they lend money to someone they shouldn't have, they'll be required to pay it back to the government."
The rules ask for small businesses to upload their payroll statements, but with no uniform way to report them, some of the statements will have to be eyeballed individually. Then there are concerns about verifying the information and the potential for fraud or just simple mistakes.
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Lenders are gun-shy after the industry was held liable for billions of dollars in fines and lawsuits following the rollout of relief efforts after the 2008 financial crisis.
On Thursday, Democratic presidential candidate Joe Biden drew attention to the potential administrative issues of the coronavirus relief package. He pressed the administration to get loans out quickly and not just to "the well-connected" or a few "splashy" examples.
Nick Simpson, head of public affairs for the Consumer Bankers Association, said: "If you're already an SBA-approved lender, then you have the rails to run the requirements. Since it's run through that system, it's not like something has to be created."
"The potential for things to slow down would be in the way the verification and underlying requirements are on the bank," Simpson said. "If it's a very easy process with minimal underwriting, more like a credit card than a traditional loan, then things will operate a lot smoother.
"The longer the application process takes, there could be some delay. Not everyone will get a check tomorrow, but that doesn't mean they won't get one," Simpson said.