U.S. banks on Monday began another chaotic dash to grab $310 billion in fresh small-business aid released by the government, after 11th-hour changes to the first-come-first-served program led to technology issues for some lenders.
The Small Business Administration (SBA) reopened its Paycheck Protection Program at 10:30 a.m. EDT (1430 GMT), allowing lenders to resume processing applications from businesses hurt by the novel coronavirus shutdown.
But changes the SBA made on Sunday to the way it accepted loan submissions appeared to cause technology problems for some bankers using its "E-Tran" application processing website, which was not designed to handle huge volumes of traffic.
"So ETRAN lasted a whole 2 minutes before crashing... It's going to be a long 48 hours," tweeted Alec Downing with First Farmers Bank & Trust in Indiana.
Rob Nichols, chief executive of the American Bankers Association, the country's largest bank trade group, tweeted that bankers were "deeply frustrated" with the technology issues that he had raised "at the highest levels."
With the nation's lenders already sitting on hundreds of thousands of backlogged applications, the fresh funds are expected to be burned through in days - leaving swaths of mom-and-pop enterprises out in the cold again, banking groups said.
Bank of America, for example, reported receiving 279,000 applications in the first five days of the program launching, of which it processed at most 15%, based on a Reuters analysis of SBA disclosures. JPMorgan, the top lender in the first round, said it had 300,000 loan applications in train of which it had processed 10% by the time the first round of funds ran out.
"Everyone pretty much has applications ready to go. It should be a week or so before the money is eaten through," said Paul Merski, an executive vice president at the Independent Community Bankers of America.
He added it would be "very challenging" for anyone who has not already applied for a loan to successfully do so this week.
Created as part of a $2.3 trillion congressional economic relief package, the program kicked off on April 3 with an initial $349 billion in funding that was exhausted in less than two weeks.
Around $2 billion of that money, which was returned by big companies criticized for tapping the program, or which was ear-marked but later denied, will be added into the second pot of cash, Jovita Carranza, head of the SBA, said on Monday.
The program allows small businesses hurt by the coronavirus to apply for government-guaranteed loans with participating banks. Those loans will be forgiven if they are used to cover payroll costs, subject to some conditions.
Given the pent-up demand, banking groups had warned that the flood of new applications would strain E-Tran, which ground to a halt several times during the first round.
On Sunday, the SBA said it would try to mitigate that problem by allowing banks to submit a minimum of 15,000 applications in a one-off bulk filing, leaving smaller lenders pushing applications through E-Tran one by one. Around Monday lunchtime, the SBA said it would lower that threshold to 5,000 and imposed a submission deadline of Monday, 9 p.m. EDT.
"This site can't be reached," however, was the message several bankers said they saw when trying to access the system on Monday.
In an email, the SBA said that changes to ensure loan submissions were fairly paced would result in some lenders being "timed out" if they tried to submit too many applications.
The agency has been working around the clock to try to smooth the submission process for the unprecedented program, but some bankers said the changes may have unintentionally resulted in unequal access to the program.
"Fix the system or take everyone off of it to ensure #equitableaccess for all!" tweeted Brad Bolton, chief executive of Community Spirit Bank in Alabama.
Amid the rush to get funds out the door, the first round was also hobbled by technology and paperwork issues. The program has also come under scrutiny after some banks channeled money to their larger, more profitable clients, including hedge funds and public companies, prompting some companies to return the money.
The SBA and the U.S. Treasury on Sunday tried to address concerns that big banks would suck up the second round of funds by capping the amount a lender can process at $60 billion, although few, if any, banks are likely to hit that high ceiling during the second round.
"The banks have been less than helpful in all this," said Brian Rindos of Maryland, owner of care provider Kids Adventures, who tried more than nine lenders during the first round after several turned him away or ignored him altogether. He said he received tentative approval for a loan but was still waiting for confirmation on Monday.
"Let's say I'm cautiously optimistic... this time."