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Editor’s Note: The SBA issued its final interim rule governing the Paycheck Protection Program after this story was published.
By late afternoon on Thursday, banks and credit unions had not received final guidance on the new small business lending program created by the CARES Act, putting the program’s Friday start date in jeopardy for many lenders.
The Paycheck Protection Program will provide small businesses experiencing financial hardships during the coronavirus crisis with funds to cover payroll and other expenses. The government planned to begin disbursing the Small Business Administration loans on April 3, just one week after the CARES Act was passed.
Borrower in the $349 billion program is expected to be high. Among the questions still outstanding are what documents lenders will need from small businesses and what the lender’s role will be throughout the loan program.
The SBA and the federal Treasury Department are working on guidelines, having received feedback and questions all week from lenders and small businesses across the U.S. The SBA’s Massachusetts District office at 4 p.m. on Thursday had not received the final guidelines. Among Massachusetts’ largest community banks, Webster Bank, People’s United Bank and Eastern Bank all confirmed they were planning to take part. Rockland Trust Co. and Berkshire Bank had not yet returned inquiries as of publication time.
Jon Skarin, an executive vice president with the Massachusetts Bankers Association, said banks want to start accepting applications and get money to small businesses. But final guidance is needed to ensure lenders and borrowers are not at risk, he said, especially with loan amounts potentially reaching $10 million.
“I think the biggest concern is that we’re trying to roll out a gigantic program in an incredibly short period of time,” Skarin said.
MBA members are committed to the program, Skarin said, and banks have already assigned staff to handle the expected volumes. He recognized the task faced this week by the SBA and Treasury in trying to roll out the program.
Eastern Bank President Quincy Miller has been hearing from small business customers all week about the program and expects high participation.
Because Eastern Bank will accept applications digitally, time will be needed to update system coding to accommodate the SBA’s guidelines. Miller expects no more than a few days to prepare the system, depending on the complexity of the final guidance.
To get a head start on the program, Eastern will put an application online Friday to start collecting information from small businesses.
“If we can start the ball rolling, we can build the queue up, get as much info as we need, and then reach out to customers to get additional information once the guidance is finalized,” Miller said.
Miller has been communicating with banks in the region and across the U.S. this week, and he expects most SBA lenders to participate in the program.
“I think this is a fantastic program to support small businesses in this most dire time of need,” Miller said. “That’s why we expect the demand to be so great.”
