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SBA temporarily shuts out big banks and businesses from Paycheck Protection Program

David Brancaccio, Nova Safo, and Alex Schroeder Apr 30, 2020
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How can regulators make sure small businesses are the ones getting this money? Cindy Ord/Getty Images
COVID-19

SBA temporarily shuts out big banks and businesses from Paycheck Protection Program

David Brancaccio, Nova Safo, and Alex Schroeder Apr 30, 2020
How can regulators make sure small businesses are the ones getting this money? Cindy Ord/Getty Images
HTML EMBED:
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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

What are the details of President Joe Biden’s coronavirus relief plan?

The $1.9 trillion plan would aim to speed up the vaccine rollout and provide financial help to individuals, states and local governments and businesses. Called the “American Rescue Plan,” the legislative proposal would meet Biden’s goal of administering 100 million vaccines by the 100th day of his administration, while advancing his objective of reopening most schools by the spring. It would also include $1,400 checks for most Americans. Get the rest of the specifics here.

What kind of help can small businesses get right now?

A new round of Paycheck Protection Program loans recently became available for pandemic-ravaged businesses. These loans don’t have to be paid back if rules are met. Right now, loans are open for first-time applicants. And the application has to go through community banking organizations — no big banks, for now, at least. This rollout is designed to help business owners who couldn’t get a PPP loan before.

What does the hiring situation in the U.S. look like as we enter the new year?

New data on job openings and postings provide a glimpse of what to expect in the job market in the coming weeks and months. This time of year typically sees a spike in hiring and job-search activity, says Jill Chapman with Insperity, a recruiting services firm. But that kind of optimistic planning for the future isn’t really the vibe these days. Job postings have been lagging on the job search site Indeed. Listings were down about 11% in December compared to a year earlier.

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