Overload of SBA System Predictable, Arkansas Bankers Say

Overload of SBA System Predictable, Arkansas Bankers Say
George Makris

The technical difficulties that plagued the U.S. Small Business Administration's loan application system was no surprise, two Arkansas bank executives said Tuesday.

Despite limits on the number of applications any single lender could submit at once, the system known as ETran bogged down on Monday and continued to be problematic on Tuesday morning as the SBA began approving the second round of forgivable loans authorized by Congress in response to the coronavirus pandemic.

“The SBA is not ready for round two,” said Tim Hicks, chief administrative officer and executive director of investor relations at Little Rock’s Bank OZK. “It’s worse than round one."

Hicks said OZK had 2,000 applications approved in the first round of the Paycheck Protection Program, which distributed nearly $350 billion nationwide in less than two weeks. Bank OZK had more than 2,000 prepared for round two, he said.

The SBA "tried to help, but I believe they made it worse," Hicks said. "They allowed banks to submit in bulk if they had 15,000 applications. Then they lowered it to 5,000, but that didn’t help the mid-ranged and small banks. Hopefully, we make better progress today.

“We worked from 9:30 a.m. through the night to submit as many as we could, but less than 100 were funded. We’re still working as hard as we can. We just need the SBA to help us get them processed.”

Lenders at Simmons Bank of Pine Bluff have also been working long hours and similarly running into roadblocks, George Makris, chairman and CEO of its holding company, Simmons First National Corp., told Arkansas Business. 

“I don’t think it was a surprise to anyone with all the pent-up demand,” Makris said. “I don’t know if any system could’ve handled the volume. Our crew worked till 3 a.m. this morning until the system went down again. We were able to get quite a few through, basically after hours.

“I know we’ve handled over 7,000 applications here, and I expect the dollar amount will be $1.2 billion-$1.5 billion. About 1,500 have been funded, and the applications keep coming in.”

Makris said self-employed workers can access this round of funding unlike the first round, and Simmons is able to feed them into the line on a first come-first serve applicant basis.

“There’s a rush to get the paperwork processed before funds run out again,” he said. “Some people didn’t realize how fast $350 billion can go, and they’re just now waking up to that.

“We’re getting a lot of one- and two-person shops. Unlike bigger businesses who have more people to help get their application in order, we’re really having to hand hold them throughout the process.”

SBA-guaranteed lending is a specialty area for many banks, but the PPP has doubled the number of lenders in the system, Lorrie Trogden, executive director of the Arkansas Bankers Association, said Tuesday.

Normally, fewer than 30 of the 86 banks chartered in Arkansas regularly participate in the 7a lending program, the most common type of loan guaranteed by the SBA. But the PPP has made virtually all banks SBA lenders, she said.

PPP loans can cover as much as eight weeks of expenses and are forgivable if the money is used to retain workers or for other approved expenses such as mortgages, leases and utilities.

“This funding isn’t a giveaway,” Makris said. “It’s a substitute for unemployment, and it makes perfect sense because in order for an employee to enter the unemployment realm there is a wait period.

“This keeps businesses ready to reopen. People forget that this is essentially quick-action unemployment.”