As the Treasury Department launched Friday its relief loan program for small businesses being hurt by the COVID-19 pandemic, advisors say they are hitting hurdles with large banks and have questions about the $349 billion of available assistance.
The news comes just hours after the Treasury released its interim rules on the Paycheck Protection Program, which it posted online in a 31-page document. It also made the revised application form accessible online.
That earned the agency the praise of Jeff Levine, director of advisor education for Kitces.com and director of advanced planning for Buckingham Wealth Partners. “I’m about to review and break them down, but before doing so, I just want to quickly mention how incredible it is that @USTreasury got these out before tomorrow ‘Opening Day,’ he tweeted late Thursday in a lengthy thread.
This development seems to be “the good news” for many advisors and small business owners. There also appears to be lots of “bad news.”
‘10,000 Loans an Hour’
To get their loans going, advisors and others turned to the big banks, like Bank of America. BofA is saying that applicants must have an existing credit account with it in order to access the new program.
“A number of banks requiring existing checking AND/or lending relationship with bank – this will be a big hurdle for many IC/Self-employed and those that might need the loans the most – obviously larger businesses have these relationships but not many small businesses,” Carson Group’s retirement head Jamie Hopkins said on Twitter.
This situation infuriated many individuals, including Sen. Marco Rubio, R-Fla., who tweeted: “.@BankofAmerica got bailed out with $45 billion of your tax money But now just heard from #smallbusiness with a BOA account & a 400k line of credit they paid off BOA denied #PPP loan because they don’t have a credit account A ridiculous requirement that isn’t anywhere in law.”
Bill Sweet, chief financial officer of Ritholtz Wealth Management, chimed in via a tweet: “PPP roll-out is basically the small business Fyre Festival – BOA automatically rejecting applicants who don’t have an existing credit card, Chase website returning null data.” (Frye was a fraudulent “luxury” music event set for April 2017 in the Bahamas; it was not staged as promised and led to six lawsuits.)
BofA said it’s processed about 106,000 applications in the first 24 hours of the program; the average amount requested is about $245,000 and the total is $26 billion. On Saturday, it began working with small businesses that have a BofA deposit account and that do not have a lending relationship with it or with another bank.
Wells Fargo said in a statement: “As soon as we can start accepting applications, we’ll add the link on this page to the online application, so check back often.”