SBA Loan Program Starts As Small Businesses Make Urgent Applications - The New York Times

SBA Loan Program Starts As Small Businesses Make Urgent Applications - The New York Times

SBA Loan Program Starts As Small Businesses Make Urgent Applications - The New York Times

Posted: 03 Apr 2020 05:39 PM PDT

[Read our Coronavirus Relief Small Business F.A.Q.]

The frenzy began even before most banks opened. By 9 a.m. on Friday, banks had already processed 700 loans totaling $2.5 million for small businesses as the spigot opened on a federal emergency relief program. But that was just the beginning. By early afternoon that number had ballooned to $1.8 billion. And by evening it was $3.2 billion in loans that will go to more than 10,000 small businesses desperate to save themselves.

It was all part of a scramble by small businesses around the country to stay alive by grabbing a piece of a Treasury Department program to pump $349 billion into the sputtering U.S. economy. Small businesses, which employ nearly half of America's private-sector workers, are hemorrhaging, and the loans are meant to help them retain employees or rehire those they let go because of the coronavirus pandemic.

But business owners found that applying for the money was harder than they had anticipated. Lenders had received guidance from the Treasury Department only the night before, just hours before they were to start making loans. On top of that, banks imposed their own rules on which businesses could and couldn't borrow. And many lenders, including JPMorgan Chase, the nation's largest, didn't have their websites ready for borrowers until later Friday.

For small-business owners, many of whom have run out of cash to pay salaries and rent, time was everything. Fearful that the money will run out — Treasury Secretary Steven Mnuchin said the loans would be on a first-come, first-served basis — they flooded banks with calls and emails as they tried to get to the front of the line.

"I've been up all night," said Jeremy Resnick of Jacksonville, Fla., who runs several businesses, including a real estate brokerage and a chain of ice cream stores. "They put out these rays of hope for people, and the reality behind it isn't there."

The frenzy played out against the backdrop of yet another grim unemployment report. On Friday, the Labor Department said employers shed 701,000 jobs last month — the biggest monthly drop in more than a decade, ending a landmark 113 months of job creation. And nearly 10 million people applied for unemployment benefits over the previous two weeks.

Some of their former employers view the relief program, called the Paycheck Protection Program, as a potential lifeline. Companies with fewer than 500 workers have slashed millions of jobs in recent weeks as restaurants, bars, retailers and other Main Street businesses across the country were ordered to shut their doors.

The program offers such companies loans of up to $10 million, which can be forgiven if the business uses the money to retain workers for eight weeks or rehire for positions it cuts in the wake of the pandemic. The Small Business Administration is backing the loans, but customers must apply through banks or other lenders.

Bank of America was the first big bank to begin taking applications, and it had around 10,000 by early Friday, Brian Moynihan, the bank's chief executive, said on CNBC. By evening, its loan requests totaled $22 billion, a spokesman said.

But many Bank of America customers were dismayed to find that the lender would not work with them because they had only accounts, and not loans, with the bank. The bank said it was accepting applications only from customers who had both "a pre-existing business lending and business deposit relationship" as of Feb. 15.

That eliminated Tamara Alexander and her business in Houston, which provides behavioral therapy for children with autism. With 13 employees, Ms. Alexander is struggling to stay afloat with just a trickle of clients who can connect over video chat.

She went to her Bank of America branch Friday morning with high hopes. But although her banker had assured her the day before that she could get a loan, she was told that only those with an existing loan or credit card would be eligible.

"We kind of bootstrapped our way to our business — thankfully we haven't needed to acquire any debt," Ms. Alexander said. "The one bit of help we need, we can't get. And coming from our own bank, it's just so stressful."

Dean Athanasia, the head of Bank of America's consumer and small business group, sent a memo to employees on Friday pledging to "enhance" the program soon "to accommodate more and more of our small-business clients."

But even customers with previous loans were struggling. Melissa Perri, who runs a software consulting firm, ProdUX Labs, in New York that employs six people, has for years had a business bank account and a $42,000 line of credit with Bank of America, she said. But when she tried to apply on Friday, she got a message that said she was denied because she didn't have a credit card.

"I was pretty frustrated," she said. "I said: 'I have multiple accounts with you, and I've been banking with you for years. How is this possible?'"

Bank of America said on its website that a "business credit card, line of credit or loan" would all qualify. That should have made Ms. Perri eligible. A spokesman said the bank would look into her case.

Other large banks imposed similar requirements.

JPMorgan Chase said it would take applications only from people who had a business checking account with the bank as of Feb. 15. A notice on Wells Fargo's website said it, too, required an existing business checking account. Citi has not yet announced its rules; a spokesman said it was reviewing the program's rules and planned to start accepting applications "as soon as possible."

Hundreds of business owners complained on Twitter that they were ineligible for their bank's program or that it had not yet started accepting applications. The National Federation of Independent Business said many feared they would be shut out of the aid effort.

"This has the potential to be the last straw for many small businesses and their employees," it said.

Adding to the pressure: Many expect the program's $349 billion lending pool to run out unless Congress allocates more money. "If we run out of money, we're going to go back to Congress and get more money for small business," Mr. Mnuchin said on the Fox Business Network on Friday.

The Treasury Department had hoped to bring nonbank lenders into the program, but as of Friday, the government had not even released an application that would let financial technology companies apply to participate, industry executives said.

Stephen D. Steinour, the chief executive of Huntington Bank, a lender in Columbus, Ohio, said his staff had worked all night to get the bank's website ready to start taking applications online by late Friday afternoon.

Mr. Mnuchin said banks would be able to approve applications and send borrowers money "the same day." Mr. Steinour said he thought a same-day turnaround would be possible in a few weeks, but not immediately. He expects to have his bank's first batch of approvals — and borrowers' checks — ready by early next week.

Lenders struggled with operational issues throughout Friday.

Chase's website for the program returned error messages at times in the morning, leading many aspiring applicants to assume it was overwhelmed with traffic.

A Chase spokeswoman said that the site had not crashed and that it was taken offline for updates. The bank started accepting loan requests shortly after 1 p.m.

One would-be borrower was Anne Lanier. She and her husband had been working the phones since Thursday looking for a bank to lend them $11,000 to keep paying the five employees of their Brooklyn bar, Black Rabbit, which closed on March 16.

Without immediate help, the couple will be out of business. But the last time they borrowed money for the bar was 13 years ago, from a local bank that has long since discarded the paperwork.

Lenders that Ms. Lanier found on the S.B.A.'s website said they were dealing only with existing customers. The couple turned to Chase, which provides them a business checking account. On Friday afternoon, they submitted a preliminary loan request with their business name, tax identification number and contact information, and received a message saying a Chase representative would contact them. At the time of this article's publication, they were still waiting.

Some of the features that were supposed to make it easier for banks to quickly ramp up lending through the program may actually make it harder for people who need the money to get it.

Participating banks are protected from liability for some things that regulators would normally punish them for, like not performing a thorough-enough background check on a borrower who later turns out to be a criminal. But they aren't completely exempt from having to look into customers' profiles, and one way they can avoid having to do too much extra paperwork is to lend only to existing customers.

That barrier is causing problems for small businesses that have not borrowed money recently. It is an even bigger problem for minority-owned businesses, which struggle even in good times to get banks to lend to them.

"Small-business lending already has a discrimination problem," said Amanda Fischer, the policy director at the Washington Center for Equitable Growth.

Another fear is that the program will be overrun by fundamentally healthy businesses eager to have the government cover up to two months of their payroll costs. Borrowers don't have to document a hardship like a sharp sales drop; they simply have to affirm that "current economic uncertainty" makes the aid necessary to support their "ongoing operations."

Despite the paycheck program's chaotic start, Mr. Steinour of Huntington Bank said he hoped it would play a vital role in salvaging tens of thousands of businesses that would otherwise collapse.

"This is an extraordinary program, and to have it all put together in a week was a phenomenal, around-the-clock effort," he said.

Alan Rappeport and Nathaniel Popper contributed reporting.

Small business owners, this credit card’s new 100K-point welcome bonus is just for you - BGR

Posted: 20 Mar 2020 08:59 PM PDT

  • Chase's Ink Business Preferred Credit Card, which is a card product for business owners, just launched a 100,000-point welcome bonus.
  • In these uncertain times, with the coronavirus still spreading and so many small businesses seeing their revenue evaporate as customers hunker down at home, a solid card like this is worth considering and may just end up serving as a lifeline.
  • Visit BGR's homepage for more stories.

BGR has partnered with The Points Guy for our coverage of credit card products. BGR and The Points Guy may receive a commission from card issuers.

Please note: the offers mentioned below are subject to change at any time and some may no longer be available.

One of the best business cards on the market today just launched a stellar welcome bonus for new cardmembers.

For small business owners that may be struggling at the moment or looking for all the help they can get in terms of saving money, the Ink Business Preferred Credit Card from Chase is a card you might want to put on your radar right now. One of the key reasons is that you'll earn 100,000 Ultimate Rewards points when you spend $15,000 on purchases in the first three months of account opening.

Now, granted — travel is the last thing on people's minds right now, so the card's lineup of travel-related benefits isn't going to appeal to most people at the moment. Indeed, airlines have cut out major parts of their route network as a result of the spread of the coronavirus, and warnings have been issued to everyone domestically and internationally about traveling. However, these circumstances won't last forever, and there's still plenty worth recommending about this card, even outside of anything related to travel.

The Ink Business Preferred has always had a great sign-up bonus, for starters. Now, small business owners can take advantage of an even larger bonus when they apply.

Chase considers this sign-up bonus to be worth $1,250 in travel rewards, since you can redeem your points at 1.25 cents each for travel booked through the Chase Ultimate Rewards travel portal. The valuation of this bonus from The Points Guy, however, makes this sign-up bonus worth $2,000 since you can transfer your points at a 1:1 ratio to a selection of hotel and airline partners, including Hyatt, Southwest, and United — again, once restrictions start being lifted on travel.

To get the sign-up bonus, there's a corresponding spending requirement ($15,000 during the first three months of card ownership) that's significantly higher than you typically see associated with standard welcome offers. However, that requirement equates to $5,000 per month in spending, something that many business owners shouldn't have trouble meeting. The Ink Business Preferred also has a $95 annual fee, but it can be well worth the cost if you're able to maximize the 3x bonus categories, use the card's perks and obtain solid value from your Chase Ultimate Rewards points

In addition to the 100,000-point sign-up bonus, the Ink Business Preferred provides the following benefits:

  • 3x earnings: Earn 3x points per dollar spent on the first $150,000 spent in combined purchases each account anniversary year across the following categories: Travel; shipping purchases; internet, cable and phone services; advertising purchases with social media sites and search engines. You'll earn 1 point per dollar spent on everything else.
  • Employee cards: Get employee cards at no additional cost. You can set and change individual spending limits anytime.
  • Transfer partners: Transfer your points at a 1:1 ratio to 10 airline partners and three hotel partners.
  • Trip delay protection: If your covered trip is delayed by a covered hazard for more than 12 hours or requires an overnight stay, you can be reimbursed up to a maximum of $500 for each purchased ticket for reasonable expenses.
  • Baggage delay protection: If your baggage is delayed or misdirected for more than six hours, you can be reimbursed up to $100 a day for five days to purchase essential items.
  • Lost luggage insurance: If your baggage is lost or damaged, you can be reimbursed for up to $3,000 per passenger to repair or replace the baggage and personal property contained within.
  • Trip cancellation/interruption insurance: If your trip is canceled or cut short by sickness, severe weather and other covered situations, you can be reimbursed up to $5,000 per person and $10,000 per trip for your prepaid, nonrefundable travel expenses.
  • Auto rental collision damage waiver: When you decline the rental company's collision insurance and charge the entire rental cost to your card, you can be reimbursed up to the actual cash value of the vehicle for theft and collision damage for most cars in the U.S. and abroad. Coverage is primary when renting for business purposes or renting outside your country of residence for personal reasons.
  • Purchase protection: Covers your new purchases for up to 120 days against damage or theft up to $10,000 per claim and $50,000 per account.
  • Extended warranty protection: Extends the period of US manufacturer's warranty by an additional year, on eligible warranties of three years or less.
  • Cell phone protection: Get up to $600 per claim against theft or damage for you and your employees listed on your monthly cellphone bill when you pay it with this card.
  • No foreign transaction fees: Another excellent benefit that will be great to have once travel opens up again, since foreign transaction fees, while small on an individual basis, rack up quick overseas.

The final word

This new Ink Business Preferred offer has the potential to provide incredible value. Having your rewards points racked up by summertime – when, fingers crossed, life might start getting at least a little back to normal — could net business owners some stellar redemption opportunities, both domestically and abroad. In these uncertain times, you may even opt to redeem points for cash back rewards. In that case, your 100,000 points will be worth $1,000 in statement credits. Since this is a business card, it should go without saying that you need to run some sort of business, which could be anything from a small company to a sole proprietorship — even someone who sells items online might be eligible.

Image Source: The Points Guy

Andy is a reporter in Memphis who also contributes to outlets like Fast Company and The Guardian. When he's not writing about technology, he can be found hunched protectively over his burgeoning collection of vinyl, as well as nursing his Whovianism and bingeing on a variety of TV shows you probably don't like.


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