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Banks Warn of ‘Overwhelming’ Demand and Messy Start for Small Business Loans Banks Warn of ‘Overwhelming’ Demand and Messy Start for Small Business Loans
(8 days later)
[Read our Coronavirus Relief Small Business F.A.Q.][Read our Coronavirus Relief Small Business F.A.Q.]
Small business owners, desperate for help amid the economic meltdown wrought by the coronavirus pandemic, are eagerly awaiting the start of a $349 billion government relief program.Small business owners, desperate for help amid the economic meltdown wrought by the coronavirus pandemic, are eagerly awaiting the start of a $349 billion government relief program.
But just one day before the program’s launch on Friday, the banks and other lenders that the government is relying on to fund loans and vet applicants were still waiting for much of the information they need to participate. They are also nervous about how they — and the government — will handle what is expected to be a huge crush of demand.But just one day before the program’s launch on Friday, the banks and other lenders that the government is relying on to fund loans and vet applicants were still waiting for much of the information they need to participate. They are also nervous about how they — and the government — will handle what is expected to be a huge crush of demand.
“The response is overwhelming — it’s unlike anything I’ve ever seen in my career,” said Craig Street, the chief lending officer of United Midwest Savings Bank, a community bank in Columbus, Ohio. “We’re talking about attempting to do 10 times our normal monthly loan volume, and maybe more than that.”“The response is overwhelming — it’s unlike anything I’ve ever seen in my career,” said Craig Street, the chief lending officer of United Midwest Savings Bank, a community bank in Columbus, Ohio. “We’re talking about attempting to do 10 times our normal monthly loan volume, and maybe more than that.”
The so-called paycheck protection program, part of the $2 trillion stimulus package enacted last week, offers companies and nonprofits with up to 500 workers a low-interest loan to cover up to two months of payroll and other expenses. Most — and in some cases, all — of the loan will be forgiven if the borrower retains its workers and doesn’t cut their wages. (The government will repay lenders for the forgiven portions of the loans.)The so-called paycheck protection program, part of the $2 trillion stimulus package enacted last week, offers companies and nonprofits with up to 500 workers a low-interest loan to cover up to two months of payroll and other expenses. Most — and in some cases, all — of the loan will be forgiven if the borrower retains its workers and doesn’t cut their wages. (The government will repay lenders for the forgiven portions of the loans.)
That’s an appealing deal for many companies that would otherwise be leery of taking on debt in the midst of a global crisis. Jason Dolmetsch, the president of MSK Engineering & Design in Bennington, Vt., said he was eager to apply. His engineering firm and its affiliated architectural company are trying to hold on to their 23 workers despite a rash of canceled and postponed projects.That’s an appealing deal for many companies that would otherwise be leery of taking on debt in the midst of a global crisis. Jason Dolmetsch, the president of MSK Engineering & Design in Bennington, Vt., said he was eager to apply. His engineering firm and its affiliated architectural company are trying to hold on to their 23 workers despite a rash of canceled and postponed projects.
When he called his business’s banker on Monday, he was told to be patient and wait. The bank had no information yet about how the program would work.When he called his business’s banker on Monday, he was told to be patient and wait. The bank had no information yet about how the program would work.
Late Tuesday, the Treasury Department and the Small Business Administration released an overview for borrowers and a sample loan application. The S.B.A., which is backing the loans, has waived most of its usual requirements — the loans do not require collateral or detailed financial records — and is encouraging lenders to take applications digitally and make quick decisions.Late Tuesday, the Treasury Department and the Small Business Administration released an overview for borrowers and a sample loan application. The S.B.A., which is backing the loans, has waived most of its usual requirements — the loans do not require collateral or detailed financial records — and is encouraging lenders to take applications digitally and make quick decisions.
“This will be up and running tomorrow,” Treasury Secretary Steven Mnuchin said on Thursday at a White House briefing. He added that loan checks could be disbursed “the same day” that borrowers applied.“This will be up and running tomorrow,” Treasury Secretary Steven Mnuchin said on Thursday at a White House briefing. He added that loan checks could be disbursed “the same day” that borrowers applied.
But on Thursday evening, lenders were still waiting for technical information about how to underwrite the loans — which will be break even, at best, for most lenders — and collect reimbursement on those that qualify for forgiveness. A trade group, the National Association of Government Guaranteed Lenders, had to postpone a training call for 1,500 lenders on Thursday because it did not have the needed information from the S.B.A.But on Thursday evening, lenders were still waiting for technical information about how to underwrite the loans — which will be break even, at best, for most lenders — and collect reimbursement on those that qualify for forgiveness. A trade group, the National Association of Government Guaranteed Lenders, had to postpone a training call for 1,500 lenders on Thursday because it did not have the needed information from the S.B.A.
“I’ve asked for the information twice today, and I still have nothing,” Tony Wilkinson, the group’s chief executive, said on Wednesday. “I worry that they’re asking lenders to make loans without the information they need to understand the rules of engagement.”“I’ve asked for the information twice today, and I still have nothing,” Tony Wilkinson, the group’s chief executive, said on Wednesday. “I worry that they’re asking lenders to make loans without the information they need to understand the rules of engagement.”
Bank lobbyist groups have warned the Treasury Department that the program as designed will not be workable, expressing alarm about their own legal liability as they try to rush money to borrowers and keep tabs on potential fraud. The Independent Community Bankers of America sent a letter to Mr. Mnuchin on Wednesday complaining that guidelines calling for low-interest loans could mean “unacceptable losses” for lenders.Bank lobbyist groups have warned the Treasury Department that the program as designed will not be workable, expressing alarm about their own legal liability as they try to rush money to borrowers and keep tabs on potential fraud. The Independent Community Bankers of America sent a letter to Mr. Mnuchin on Wednesday complaining that guidelines calling for low-interest loans could mean “unacceptable losses” for lenders.
S.B.A. representatives did not respond to questions about when guidance for lenders would be available.S.B.A. representatives did not respond to questions about when guidance for lenders would be available.
Although the government has scrambled to pull aid together quickly, the program’s slow rollout has frustrated business owners facing a daily fight to salvage their companies. Paul Caragiulo is an owner of a group of restaurants in Sarasota, Fla., that employ around 150 people. He is loath to lay off anyone — even though his restaurants’ sales have cratered — but he’s also hesitant about borrowing what could be millions of dollars from a program whose details are being worked out on the fly.Although the government has scrambled to pull aid together quickly, the program’s slow rollout has frustrated business owners facing a daily fight to salvage their companies. Paul Caragiulo is an owner of a group of restaurants in Sarasota, Fla., that employ around 150 people. He is loath to lay off anyone — even though his restaurants’ sales have cratered — but he’s also hesitant about borrowing what could be millions of dollars from a program whose details are being worked out on the fly.
The information sheets posted by the Treasury Department and the S.B.A. have not reassured him. “Those are bullet points, not term sheets,” he said. “We’re not used to having debt, and we don’t look at that lightly.”The information sheets posted by the Treasury Department and the S.B.A. have not reassured him. “Those are bullet points, not term sheets,” he said. “We’re not used to having debt, and we don’t look at that lightly.”
The Trump administration has said it wants the paycheck protection loans to be easy to obtain; a sample application posted on Tuesday is a four-page form that can be completed in less than 10 minutes. But the fine print contains a line that gave Mr. Caragiulo pause: Borrowers must promise to buy only American-made equipment and products “to the extent feasible.”The Trump administration has said it wants the paycheck protection loans to be easy to obtain; a sample application posted on Tuesday is a four-page form that can be completed in less than 10 minutes. But the fine print contains a line that gave Mr. Caragiulo pause: Borrowers must promise to buy only American-made equipment and products “to the extent feasible.”
Mr. Caragiulo, who uses Italian pizza ovens, said the requirement seemed like an absurd bureaucratic tripwire. When asked about it, an S.B.A. spokeswoman pointed to a 1992 law that requires the agency to “encourage” business owners receiving financial help to buy American goods. She did not respond to questions about how — or if — that will be enforced.Mr. Caragiulo, who uses Italian pizza ovens, said the requirement seemed like an absurd bureaucratic tripwire. When asked about it, an S.B.A. spokeswoman pointed to a 1992 law that requires the agency to “encourage” business owners receiving financial help to buy American goods. She did not respond to questions about how — or if — that will be enforced.
Other federal small business aid efforts have been generous but chaotic. A program offering low-interest disaster loans funded directly by the government has already had more than 100,000 applicants, according to one person familiar with its operations.Other federal small business aid efforts have been generous but chaotic. A program offering low-interest disaster loans funded directly by the government has already had more than 100,000 applicants, according to one person familiar with its operations.
The S.B.A. started taking applications weeks ago, but last Friday’s stimulus bill added a new sweetener: Applicants, including those who are rejected for loans, are eligible for up to $10,000 in cash grants. (The funds are described on the S.B.A. website as a “loan advance,” but an agency spokeswoman confirmed that it does not have to be repaid.)The S.B.A. started taking applications weeks ago, but last Friday’s stimulus bill added a new sweetener: Applicants, including those who are rejected for loans, are eligible for up to $10,000 in cash grants. (The funds are described on the S.B.A. website as a “loan advance,” but an agency spokeswoman confirmed that it does not have to be repaid.)
Abninder Mundra, who owns a franchise of the UPS Store in Portola Valley, Calif., applied for a disaster loan on March 20 and was approved four days later for $210,000. Then the stimulus bill introduced the grants. Mr. Mundra said an S.B.A. representative had told him to fill out a second loan application if he wanted the grant funds. He was still waiting for both his disaster loan check and a response to the grant application.Abninder Mundra, who owns a franchise of the UPS Store in Portola Valley, Calif., applied for a disaster loan on March 20 and was approved four days later for $210,000. Then the stimulus bill introduced the grants. Mr. Mundra said an S.B.A. representative had told him to fill out a second loan application if he wanted the grant funds. He was still waiting for both his disaster loan check and a response to the grant application.
Mr. Mundra said he could afford to wait a few weeks and was grateful for the aid. He also plans to seek a paycheck protection loan as soon as his bank starts taking applications. He had to cut his three employees’ hours to offset a drop in foot traffic, and hopes the loan will help restore them.Mr. Mundra said he could afford to wait a few weeks and was grateful for the aid. He also plans to seek a paycheck protection loan as soon as his bank starts taking applications. He had to cut his three employees’ hours to offset a drop in foot traffic, and hopes the loan will help restore them.
Updated July 7, 2020
The coronavirus can stay aloft for hours in tiny droplets in stagnant air, infecting people as they inhale, mounting scientific evidence suggests. This risk is highest in crowded indoor spaces with poor ventilation, and may help explain super-spreading events reported in meatpacking plants, churches and restaurants. It’s unclear how often the virus is spread via these tiny droplets, or aerosols, compared with larger droplets that are expelled when a sick person coughs or sneezes, or transmitted through contact with contaminated surfaces, said Linsey Marr, an aerosol expert at Virginia Tech. Aerosols are released even when a person without symptoms exhales, talks or sings, according to Dr. Marr and more than 200 other experts, who have outlined the evidence in an open letter to the World Health Organization.
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
Scientists around the country have tried to identify everyday materials that do a good job of filtering microscopic particles. In recent tests, HEPA furnace filters scored high, as did vacuum cleaner bags, fabric similar to flannel pajamas and those of 600-count pillowcases. Other materials tested included layered coffee filters and scarves and bandannas. These scored lower, but still captured a small percentage of particles.
A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico.
The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth.
The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave.
So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
“I think the government really understood that small businesses are the backbone of the economy,” he said. “If we stop employing people, they won’t have money to pay their bills.”“I think the government really understood that small businesses are the backbone of the economy,” he said. “If we stop employing people, they won’t have money to pay their bills.”
But with job losses already setting records and certain to worsen, lenders fear that the $349 billion Congress allocated for the paycheck program will quickly run out. Senior officials from the Treasury and S.B.A. told reporters on Tuesday that they were prepared to ask Congress for more money if needed.But with job losses already setting records and certain to worsen, lenders fear that the $349 billion Congress allocated for the paycheck program will quickly run out. Senior officials from the Treasury and S.B.A. told reporters on Tuesday that they were prepared to ask Congress for more money if needed.
Jim Donnelly, the chief commercial officer of Bangor Savings Bank in Maine, said his small staff was working around the clock to accommodate the pent-up demand. In a typical year, his bank handles hundreds of business loans. He expects to process thousands in the coming months.Jim Donnelly, the chief commercial officer of Bangor Savings Bank in Maine, said his small staff was working around the clock to accommodate the pent-up demand. In a typical year, his bank handles hundreds of business loans. He expects to process thousands in the coming months.
And even though his bank was still waiting for critical technical information, it planned to start taking loan applications on Friday.And even though his bank was still waiting for critical technical information, it planned to start taking loan applications on Friday.
“We have local businesses like restaurants that have shut down and are looking at these loans as a way to reopen their doors,” he said.“We have local businesses like restaurants that have shut down and are looking at these loans as a way to reopen their doors,” he said.
Many of the nation’s largest banks said they planned to offer the loans, though some will restrict which applicants they will work with.Many of the nation’s largest banks said they planned to offer the loans, though some will restrict which applicants they will work with.
JPMorgan Chase, for example, said it would make the loans available to customers with Chase business checking accounts as of Feb. 15. Bank of America and Citi both said they planned to participate but did not yet have details.JPMorgan Chase, for example, said it would make the loans available to customers with Chase business checking accounts as of Feb. 15. Bank of America and Citi both said they planned to participate but did not yet have details.
The Treasury has encouraged non-bank lenders to also offer the loans, but some that want to do so say the process has been maddening. Kabbage, one of the biggest online lenders, said the system for becoming an approved lender was opaque.The Treasury has encouraged non-bank lenders to also offer the loans, but some that want to do so say the process has been maddening. Kabbage, one of the biggest online lenders, said the system for becoming an approved lender was opaque.
Mr. Street, at United Midwest Savings Bank, was also desperate for more information, including details about how thoroughly banks are expected to scrutinize potential borrowers. Any choice involves trade-offs: Quick approvals and cash disbursements raise the risk of mistakes and borrower fraud, but rigorous underwriting takes time that desperate business owners and overtaxed bankers don’t have to spare.Mr. Street, at United Midwest Savings Bank, was also desperate for more information, including details about how thoroughly banks are expected to scrutinize potential borrowers. Any choice involves trade-offs: Quick approvals and cash disbursements raise the risk of mistakes and borrower fraud, but rigorous underwriting takes time that desperate business owners and overtaxed bankers don’t have to spare.
Mr. Street hopes the S.B.A. and the banking industry’s regulators will give lenders leeway to err on the side of speed.Mr. Street hopes the S.B.A. and the banking industry’s regulators will give lenders leeway to err on the side of speed.
“We’re trying to set things up so that we can crank these things out,” he said. “We had calls starting Monday morning from people who wanted to borrow right away. It was hard telling people they had to wait. Nobody can afford to wait.”“We’re trying to set things up so that we can crank these things out,” he said. “We had calls starting Monday morning from people who wanted to borrow right away. It was hard telling people they had to wait. Nobody can afford to wait.”