Coronavirus rescue loans for small business went to community lenders as big banks fumbled
Category: News & Politics
Via: freewill • 4 years ago • 44 commentsBy: By HANNAH LEVITT / BLOOMBERG
I'm curious to hear about the experience other small businesses have had in trying to secure a PPP loan via SBA approved lenders under the CARES Act. I am half owner of a small engineering firm, serving clients in essential industries such as food processing, food and beverage, and data centers. We are seeing a marked slowdown in our current ongoing projects and a more pronounced reduction in work in the pipeline due to the Coronavirus situation. We have made every effort starting early on to protect our employees and get them setup to work from home, even before the Shelter at Home restrictions hit California. Working from home as worked out fairly well so far, but as you can imagine it has an impact on our efficiency which has an impact on our profitability. So far we have been able to maintain our staff at least part time, but still paying them as though full time. However, depending on how long this lasts, we can see the writing on the wall.
We began to assemble our application for a PPP Loan as soon as it and the guidelines became available on the SBA website. We called our banker at Wells Fargo in late March and they had no information on when they might start accepting applications. So we found another bank Tri-Counties Bank that was recommended to us by our lawyer. We worked with them closely over the phone and they were very helpful and we submitted the application on April 3. Within a day, the person we were working with called and said that unfortunately she just found out that we would have had to been an account holder at TCB since Feb 15 in order to have any sort of priority in their application process. They later told us that they could not take our application and that we would find out that all other banks, large and small, would tell us the same thing. Desperate, we tried dozens of banks and that was indeed the story we got from all of them.
So back to Wells Fargo we go and they are still telling us they are not setup for applications on April 4 even after the SBA PPP program got funded and everyone else was taking applications. All they had at that time was a web page where you could "express interest" in a PPP Loan, fill out a short form (which we did immediately) and that they would contact us "in a few days". Meanwhile, all the other banks are accepting applications and processing them. Several days go by with us checking every day, multiple times a day, and we never got an update from WFB. Several calls to our local WFB branch got us absolutely nowhere. She had no direction from corporate. There was no corporate line to call and help lines were not working. On 4/7 we get an email saying that they are unable to begin our application due to high demand, and it concludes with:
There is a limited amount of funds approved by the SBA for the Paycheck Protection Program. Because Wells Fargo is targeting to distribute a total of $10 billion to small businesses with fewer than 50 employees and nonprofits, you may want to apply elsewhere to increase your chances of receiving a loan before the funds run out.
Are you fucking kidding me? They knew damn well we could not go anywhere else.
On 4/8 we get another email saying that our place in line just to submit an application will not be impacted by the actions of the Fed Reserve to allow WFB to expand its participation in the PPP Loan Program. Oh...mighty nice of you! It also says that when they do finally allow us to submit an application, it will be online ONLY and they will email us a link. No numbers to call, nobody to help us understand if we are going to be able to submit an application or not. On 4/10 another email saying that we "remain in the queue based on when we submitted our initial interest". We submitted the damn thing seconds after it came up on their website! The letter says still "not able to begin your application at this time". Got an identical email again on 4/13.
WFB never sent us another email to let us know that they would accept our application. After many calls to our local WF banker she was finally able to get us access to the online application portal on 4/15/20! We of course processed the application immediately after hanging up with the banker. The next day the SBA PPP Loan funds had been exhausted, and here we are again now without a single word from WFB about the status of our application, other than to say they had received it and no information on who to contact or how to track the status.
If I have learned one thing from this ordeal, it is that we will never do business with WFB again! As soon as all this is over, they have lost a loyal customer of at least 30 years. They are done!
S E E D E D C O N T E N T
Small businesses that rushed in vain to tap $349 billion in emergency U.S. loans to survive the coronavirus crisis are facing a harsh reality: Some of the nation’s top banks lagged behind relatively tiny rivals in handling applications. As banking giants tried to automate the process, hundreds of employees at Texas lender Cullen/Frost Bankers Inc. volunteered to fill out forms manually, working late into the night in homes to set up $3 billion in loans. That contrasts with Wells Fargo & Co., which arranged only about $120 million by the time the program was depleted this week, according to people briefed on its progress.
>>>>>>>>
Wells Fargo said in a statement Friday it moved as quickly as possible to get loans for clients while trying to comply with the program’s requirements. It promised it’s ready to help the moment Congress allocates more funding. “Invitations to apply have been sent to more than 450,000 customers with a total notional loan amount of around $50 billion, which we stand ready to submit to the Small Business Administration for its acceptance,” the San Francisco-based bank said. That’s “an amount comparable to our peers.”
>>>>>>>
Cullen/Frost, less than a 50th the size of Wells Fargo, had trouble getting its computers to work seamlessly with the SBA’s systems, so it marshaled an army of employees to handle forms. Most volunteered and worked from home, where they hopped online in the early morning and worked until after dark, contacting clients directly with questions. The firm adjusted its process a few times and deployed some software to help. But much of the work was done by hand, CEO Phil Green said in an interview.
“We have processed more applications than we take in in a year and a half — and we’ve done it in 10 days,” Green said. “You had to manually wrestle it to the ground.”
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Here is the email we got from WFB on 4/13:
I think it is safe to safe say, that since they only loaned $120M of the $350B, and much much smaller banks loaned out billions each under the program, that their last sentence is a bunch of bullshit.
W ells F argo B ank
WFB
W orst F 'n B ank !
Agree!
Does anyone else have a story to report on the PPP Loan process?
I applied for the Economic Injury Disaster Loan through the SBA. The first time I applied took most of the last week of March. The application was on the SBA's website, which was very overloaded, and the application process would have been very "clunky" even if the website had been working properly. I worked on it for about 3 days, because every time I'd enter a piece of information, it took forever for the page to accept it. I saved multiple times, and got kicked off the site so many times I lost count. Finally, I only had to upload last year's corporate (I have an S-corp) returns, and I was done. And that was when they disabled the website. I never got it uploaded.
There was another, much shorter and easier online app a week later. I think that took me 10 minutes. All I've heard from that one was a general information email telling me that if I'm approved, the money will be in my bank account a few days after my application is received. Since my application should have been received already, I called to confirm that. It has, and is being processed.
From the first application process, the one that wasn't completed before the website was disabled - there was a data breach. My personal information might have been visible to others. Ugh.
As far as the PPP loan - it seems that I have to keep my staff on payroll for 8 weeks for that loan to be forgiven, which is what we initially thought was being offered. My office may be shut down for longer than that, so that loan mandates more expenses than it covers. I decided to hold off applying for it. The strings attached were not reassuring. When I was discussing it with my bank's loan officer, he expressed frustration with the federal government over how many times they'd changed the application process and loan terms. He said he was working lot of extra hours to try to process these loans, and just when he thought he was on the right track, another change came down the pipes.
Yes we heard about some of this as well, but the smaller banks, hell every bank, sure handled it better than WFB. There were a few changes, but mostly just to the application to include a few additional data points.
We were also told that we do not qualify for the EIDL. No explanation given. That is the one with unknown strings attached also, so be careful. The PPP seemed better suited to us since we are a service company and payroll is really what we are trying to cover so we don't lose our employees, some who have been with us 20 years! The PPP loan can be all or partially forgiven if it goes primarily to pay payroll to retained employees. Any part not forgiven remains payable by the borrow at a rate of only 1% and there is some deferral time without payments to allow companies to get back on their feet. Even if we had to pay the entire PPP loan back, the 1% rate beats the snot out of our business credit line, so it is a no-brainer for our situation.
Best of luck to you and your business Sandy!
The EIDL was supposed to include an unsecured advance of $1000 per employee within 3 or 4 days of application. TBH, I wouldn't really need much more than that to stay afloat for another 2 months, since my employees are furloughed and on unemployment.
I've read advice from accountants saying that if I got a PPP loan, I should open a separate checking account just for those funds, so the paper trail on how they were spent was easier to prove, if I were asked. Difficult application process, difficult accounting, invisible strings - red flags just kept popping up.
FWIW, I've heard that Bank of America has done a terrible job processing PPP applications, too. They've lost a few customers over it, too.
Good luck to you, too, Freewill.
Understood. Every company will have a different situation I suppose. To be honest, even if Congress funds the program further, and we somehow get the loan, I expect WFB will probably figure some way to screw us further. In fact they already have. They are saying that if they approve the PPP loan my partner and I will need to sign a personal guarantee. The SBA website makes it clear that there will NOT be the requirement for a personal guarantee or collateral.
I don't trust WFB anymore.
Thanks Sandy!
Hmmph.
I guess for me, since all of my employees and I are eligible for unemployment, and I legally can't work right now, PPP seemed like it might be free money, but also might not. If I eliminated those costs by putting everyone on unemployment, which I've paid into for years with only one claim, PPP seemed like a way to possibly get me to take on a loan to cover expenses that could be covered for free (via UI).
That may indeed be the situation for some, but in my business UI would only cover a fraction of what our employees would be paid if they worked full time. I have, however, read of some cases where the UI benefit enhancements that are part of the CARES Act are creating a situation where some are being paid more than if they had gone back to work full time. That won't be sustainable of course, but might lead to some not wanting to return to work as things clear up since they can stay on the UI benefits and make more for doing nothing. That could make matters worse, rather than better for some small businesses.
My employees are probably getting more take-home pay on unemployment, but we work a 32-hour week, and that also doesn't take into account the contributions I make to their retirement funds. No whispers of anybody not wanting to come back, and once the job is available again, they become ineligible for unemployment, anyway.
One has two school-age children who are incapable of entertaining themselves. She's ready to come back yesterday at half pay
“and once the job is available again, they become ineligible for unemployment, anyway.”
Not necessarily. How does the government know when the job comes available again if the ex-employee doesn’t tell them? All they have to do is show they went to a couple interviews and couldn’t find a job. Not saying that your former employees would do that, but I have seen it with my own eyes, and know some folks who work at the EDD and have some stories to tell.
I was informed by my main employer that due to my 1099 status he could not claim me for payroll purposes and the the following Friday I would have to file for a separate self employed program through WFB.
They filed through WFB and were told, no relationship, no loan.
They too went through Tri States and the stumbling block appears to be that we haven't seen a reduction in pipelines or laid anyone off. All but essential employees are 100% commission...
WFB stonewalled me for a week before saying that the $$ ran out anyway.
A week later they opened up the process again but my wife is still gainfully employed and working from home, scheduled to return to work MAY 4 with or without government permission and we felt that we really don't need to apply at this time.
( I had a terrific first quarter )
My wife was eligible for stimulus which we shared with my daughter who was laid off. Her state's UE office are FUBAR.
Apparently I was ineligible for the stimulus also...no explanation yet.
Oh well...
One thing my son and I got out of many years of Boy Scouts,
"Be prepared"
"Be prepared"
Indeed. Easier said than done though when health insurance premiums have exceed the mortgage payments and you have 3 kids in college. And we had a major business ownership transition and two engineers retiring just last year. So it has been like starting over again. Fun stuff!
Hey SP, just ran across this article with respect to 1099 employees and the PPP. This article of course focuses on agricultural work, but the information is still pertinent to any 1099 worker.
You probably already know all this, but thought I'd pass it along.
Thanks !!!
None of this makes any sense to me. Big banks had to wait to do it online yet a small bank could do it by hand.
It just all sounds fishy.
From what I hear, the bank gets paid a commission of 5% of the loan amount. For smaller banks, that commission is probably more tempting than it is to bigger banks like Wells Fargo.
Sounds about right. Give out a relief package and the banks get a percentage.
I don't mind them getting a percentage, really. Their loan officers are working to get the applications processed.
I would preface that with an, Assuming... (-:
True. I'll qualify.
MY bank's loan officers are (or were) working to get the the applications processed. The loan officer I spoke with was always readily available by phone or email.
Of course, if the loan doesn't go through, they don't get a commission. A more significant loss in revenue for a small bank than for a large one, I assume.
I see.
The application is supposed to follow the SBA guidelines. The PDF application is actually on the SBA website. The banks just administer the application process and the SBA approves it. Everyone was working with the same SBA guideline/process. If the banks drop the ball administering the SBA loan, it isn't a problem with the SBA. And yes, the smaller banks looked out for their customers and worked overtime to get their loans processed, even if they had to do it manually. Wells Fargo apparently didn't give a shit.
So basically the smaller bank decided to process the applications themselves manually where the larger bank couldn't be bothered.
Sounds that way.
Beside the fiasco with them banks it seems that many Hedge Funds were first in line for the money. Each dollar they got took loan/grant money from real small businesses.
Without oversite, this is the FUBAR that you get.
Not sure where you get that info. SBA website shows where it all went . The vast majority to small business. and most loans under $150,000. WFB is going to have to explain to their customers why only their customers were denied timely and effective access to the program. Law suits will fly, mark my words.
I don't see that on those charts. There are about a dozen, possibly more major corporations that took big bites out of those loans and that was found out through investigative reporting. And there is a total lack of transparency with only the congressional leaders having access to that list.
Well the charts don't say anything about hedge funds grabbing up big chunks of it, which is what I was refuting. The PPP loan program is for small businesses less than 500 employees, but I have seen where a large restaurant chain was able to garner several loans by breaking them up into locations of less than 500 employees. They may not allow them to get away with that, we’ll see. Other than that the charts clearly show where the money went for this particular program. A further breakdown and more detail would be nice. I’ll keep my eye out for that.
Now of the total $2.3T for the CARES Act, yes a big chunk went to large corporations, who like small businesses employ a great many people. But a comparable amount went to individuals as well in the form of tax refunds and unemployment expansion, etc. I have a nice color coded chart I can share with you when I get back to my computer on Tuesday. Cities, Counties and States got a big chunk too, as did hospitals and medical programs. So if Democrats claim to be holding up expansion of the PPP loan program for small businesses to retain employees because they claim to want more for governments and hospitals, keep in mind that those recipients already got what they asked for via other parts of the CARES Act.
and this is After
the Dems held it up for a few days,
as you know the GOP and Trumps' initial version was far less transparent, and would of enabled far more of the Wrong 'connected' corporations to once again, like the previous bailouts, to F over US Taxpayers, and allow the Wrong Companies that this stimulus was not meant for to grab billions from those for who it was 'supposedly' designed for.
Some things never change.
Under Trump, most change for the worse
Perrie - Quickly before I run out to a job site for the day, here is that chart showing how the final CARES Act funds were to be distributed by law . Same info broken down a different way HERE .
Happy to discuss tomorrow when back at home.
Great to see, but why did they apply in the first place ?
Possibly due to how vaguely it was written, or to maximise profits, either way, they did the RiGHTv thing!
.Hedge Funds Disgusting !
F them ! They don't deserve a fricken cent !
Great info Kavika - Thanks!
Well at least that big restaurant chain did the right thing and gave it back.
Good article on the Hedge Funds who have applied. Note that the article says some applied, or "attempted", or "considered" applying, but does not indicate if they were approved or actually collected the funds. Hopefully those applications will be rejected as others in that industry have suggested they should be. Several questions on the application speak to real need for the loan and hopefully the SBA will accept/allow only those loans where need is the greatest. Time will tell and the records of actual approved and delivered loans will be made available. Then we can bitch about that too.
Oddly enough, the first we learned of the PPP Loan program was through our lawyers office in late March. That is why we had a sharp eye out and were ready with our application and documentation very early on before the program even opened up. But WFB screwed us by not letting us even submit our application until 4/15, after we expressed our interest which is all their system would let us to do on April 4. Like I said we tried many other banks as well but they all said we had to have been account holders as of Feb 15, 2020. So we were stuck with WFB.
Recall where I said that lawsuits were going to fly? Check this out.
This article doesn't tell the whole story. WFB was actually delaying the ability of their account holders who expressed interest in the PPP and did not allow us to even apply until it was too late. So they even screwed us out of first come first serve priority, which will likely result in the failure of many of their customer's businesses. So apparently they were allowing hand picked companies to apply before they let us and countless others apply, just based on the company names crossed referenced to their banking data so as to result in the best fee collection for them. This suit is just the tip of the iceberg. I suspect a class action will be coming, but that isn't going to help those of us who really needed the PPP loan, and were prevented from getting it by the bank we trusted for over 30 years. Like I said, when this is over, WFB will lose perhaps hundreds of thousands of small business accounts, including ours.
My words have been marked, already!
Lawsuit alleges Wells Fargo unfairly shuffled Paycheck Protection Program applications
Which is why I was ignored, I am sure.
Definitely need to look for a new bank when this is all over! Afraid to now though as they are the ONLY chance we have at this point, if and when the SBA is further funded.
We may actually start another account at a small local bank this week, although that won't do us any good now. But good prep for the future.
I get the feeling that we are going to be faced with this sort of situation more often in the future. Once uber caution is exercised once, it will be the "go to" policy for future outbreaks, likely before they are even called "pandemics". Nobody will want to be accused of being too slow to act.
Interesting development as Congress passes a bill for additional SBA loan funding.
Big Companies Return PPP Loans
Update - Finally secured a PPP loan for our small business via Kabbage. If you are still struggling with a PPP loan application, I highly recommend them. It wasn't a perfect process but once we found someone there to help us with some online application issues on their website, it was done. My office manager is the absolute best, and when she found Chantel at Kabbage the problem was solved in less than 8 hours. Wells Fargo can go find other small business customers to screw.