The SBA loan system was down much of Monday according to senior banking executives. Because of this, not many loans could be guaranteed immediately.
The Small Business Administration (SBA) reported that the electronic system they use to process new coronavirus loans had trouble functioning in the first day of the week.
This means that the processing of billions of dollars in loans being sought by small businesses had to be temporarily stopped. Business in the US would use the funds to pay employees and continue their operations as they battle with the coronavirus pandemic.
The SBA, supported by the US Department of the Treasury, is working on managing the demand on its system.
In the US, there are an estimated 30 million small businesses. Several businesses are expected to submit their application for the program. The SBA loan system can provide up to $10 million in loans that can become free grants if the businesses adhere to certain rules, such as using the money primarily for payroll.
Meanwhile, there are instances when E-tran asks for details that are not required in the payment protection plan applications or does not recognize certain applicants who should be allowed.
Nevertheless, the SBA expressed its confidence in the program’s procedures and efficacy.
"The system is up and running. We continue to process, approve and guarantee billions of dollars of loans per hour," Jennifer Kelly, an SBA spokeswoman, said in a statement.
The SBA announced it has approved $38 billion in payment protection loans, while smaller community banks have successfully executed some loans. However, that does not mean that there has been $38 billion sent straight right away to customers’ accounts.
Major banks, observing stern regulations established after the 2008 financial crisis, are expecting final technical guidance from the SBA to begin distributions.
“This is an emergency situation, and when you do things in an emergency situation, it's going to be far less than perfect,” Rubio told CNBC.
“What we want to see is that the number of lenders in the system grows every day, and the number of problems and issues with the program diminishes every single day. So it will get better,” he added. “It has to get better.”
Meanwhile, a backup system arranged by Amazon Web Services to ease some of the pressure has yet to become operational.
Paid leave guidelines for small businesses
Last week, United States President Donald Trump’s administration issued new guidelines for employee paid leave. The government removed some requirements for small businesses in terms of providing paid leave to their employees.
According to the US Department of Labor’s guidance for the coronavirus stimulus bill, companies with fewer than 50 workers can refuse 12 weeks of paid leave that the bill stipulated for those whose children are home from school or child care.
Meanwhile, employees can qualify for two weeks of paid sick leave and 12 weeks of paid family leave under the law. The stimulus bill also exempted employers from administering the paid family leave if it could hamper business operations. The law does not apply to companies with more than 500 employees.
The Department of Labor deems small businesses as exempted from administering the family leave if it would “cause the small business to cease operating,” if employee absence would create “a substantial risk” to the business or if there were not enough employees “able, willing and qualified” to fill in for the individual on leave. In addition, small businesses cannot refuse sick leave.
