SBA temporarily shuts out big banks and businesses from Paycheck Protection Program
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Big businesses — with the aid of big banks — have gobbled up some of the money from the rescue loans that were supposed to go to small businesses during the COVID-19 pandemic.
Regulators tried to address that issue with the latest round of funding released this week — by giving the big banks a timeout. The banks were shut out for a time from applying after getting flack for favoring bigger clients.
Here’s how the lockout worked: Small businesses go through their banks to get these loans. They fill out the application, and the bank processes it through an online portal with the Small Business Administration.
“The SBA basically set aside eight hours — 4 p.m. EST until midnight [Wednesday] night — just for smaller banks, presumably with smaller business clients, so they’d get a chance to get through the system and get loans approved,” Marketplace’s Nova Safo said.
Mehrsa Baradaran, a banking law expert at the University of California, Irvine, said the move amounts to a slap on the wrist for big banks, but could have unintended consequences.
“Maybe a little bit on the margins it might help a few more small businesses get money before the big businesses come in,” she said. “But a lot of small businesses have accounts at Wells Fargo and Citi and, so you may end up hurting some small businesses.”
Big banks are, of course, not happy about all of this. The head of one banking association said the SBA would be better off fixing its approval system.
Banks have been complaining about that online portal that they have to use to process loans. They say it’s glitchy and causing delays.
According to one banking group, almost 1 million loans have been processed so far in this second round of funding, so there’s some progress.
COVID-19 Economy FAQs
Which businesses are allowed to reopen right now? And which businesses are actually doing so?
As a patchwork of states start to reopen, businesses that fall into a gray area are wondering when they can reopen. In many places, salons are still shuttered. Bars are mostly closed, too, although restaurants may be allowed to ramp up, depending on the state. “It’s kind of all over the place,” said Elizabeth Milito of the National Federation of Independent Business.
Will you be able to go on vacation this summer?
There’s no chance that this summer will be a normal season for vacations either in the U.S. or internationally. But that doesn’t mean a trip will be impossible. People will just have to be smart about it. That could mean vacations closer to home, especially with gas prices so low. Air travel will be possible this summer, even if it is a very different experience than usual.
When does the expanded COVID-19 unemployment insurance run out?
The CARES Act, passed by Congress and signed by President Donald Trump in March, authorized extra unemployment payments, increasing the amount of money, and broadening who qualifies. The increased unemployment benefits have an expiration date — an extra $600 per week the act authorized ends on July 31.
You can find answers to more questions here.
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