As we’ve been tracking all this stimulus and helicopter money being poured into the economy, a glaring issue is how the banks jumped to be the ones to provide front line customer support for the PPP process. After all, there are billions of fees at stake for them as the U.S. Treasury pays fees to process and underwrite applications.
At 10XTS, our early stage tech startup, we’re sitting here 2 & 1/2 weeks after getting notification we’ve received our E-Tran number (which supposedly indicates money has been set aside for your loan at the SBA and you’re just waiting on the bank to finalize and close).
I won’t name and shame our bank, but they’re a very large regional. And already a “preferred SBA lender” prior to “The Covid” to boot.
We were prepared well in advance of the CARES Act was even finalized and signed into law. All our meager financial statements were readied and provided to the bank, every document you’d need to underwrite our loan, which is approximately a whopping $60k — but to us, that 2 & 1/2 months against our runway is life blood.
Many of the nation’s leading banks that agreed voluntarily to perform the role of submitting the tens of thousands of applications to the Small Business Administration appear to be failing their responsibilities — and have failed to be transparent with their small business clients.
Instead, the outcome is distressingly reminiscent of the 2008 bailout: nearly 80 percent of the nation’s 30 million small businesses found themselves empty-handed despite applying for PPP loans, while an elite group of deep-pocketed hotel groups, national restaurant chains, and big-name universities got priority treatment in walking away with most of the PPP money before the little guys got their turn in line.
For example, AutoNation got nearly $80 million. How many billions is their balance sheet?
Meanwhile, we small businesses (supposedly the largest number of employers in the economy that were actually supposed to benefit from the program) were locked up in the iceberg of overwhelmed branch managers-turned call center support operators, leaving owners with little idea of their status in the application process.
People like us at 10XTS, a handful of developers and team trying to launch innovation to make our nation better, stronger, more efficient… you know the drill here.
In the interest of getting money quickly into the hands of distressed small businesses, the PPP law had tasked private banks with processing loan applications, rather than relying directly on a Small Business Administration that was too inexperienced and understaffed to manage it.
Sharing the blame, both public and private sector failures again make the case for:
- digital transformation
- disintermediation of monetary process and handling
But as passed, the law put too few safeguards in place to ensure that small business interest prevailed over the interests of the banking giants as JP Morgan Chase, Bank of America, and Wells Fargo.
The original “first-come, first-served” process became priority seating at the table for the banks’ most valued (largest fee generating) customers.
Tax dollars were co-opted by the banks to potentially enrich themselves and their biggest clients vs. serving the public interest by assisting small businesses, the largest category of private sector employers.
The nation’s banks must also provide far greater transparency about how loan applications are being processed, and much more open communication with loan applicants about where they stand in the line for loan decisions.
Small businesses are not being apprised of the sequence in which their loan applications are being transmitted to the Small Business Administration.
This is not only a looming specter for we small business owners, but should be alarm bells for any investor, big and small.
So, we replenished PPP v2.0 with more than $300 billion of new money — and now the banks have a second chance to prove they can act in the public interest to support America’s genuine small businesses.
Will they? My opinion here on the ground looking up isn’t all that enthusiastic.