Image via wikipedia user Amanda Paul

Banks large and small may not be geared up quite yet to start processing applications for a piece of $349 billion in loans guaranteed by the Small Business Administration targeted at business owners.

Friday was the first day banks could start processing applications as part of the Payroll Protection Program, included in the $2 trillion CARES Act signed into law last week to provide economic relief from the impacts of the coronavirus pandemic.

The maximum loan amount is $10 million with a fixed 1% interest rate. One of the big factors driving small business demand for these loans is they are forgivable if employers can maintain employee count and wages through June 30.

Some of the nation’s largest banks indicated ahead of Friday’s rollout that they might not be ready to start accepting applications, including JPMorgan Chase. Chase did announce on its website Friday that people could begin submitting information to apply for the loans, but they had to be existing Chase customers as of Feb. 15.

Bank of America’s website Friday morning said it would also only accept applications from existing customers, but after receiving criticism, its CEO reportedly told CNBC later in the day that applicants no longer needed an existing lending relationship with the bank to receive funds.

Wells Fargo posted on its website Friday that it would add a link to apply online once it could start accepting applications.

The loans are 100% backed by the SBA and are being provided to small businesses without collateral requirements, personal guarantees, SBA fees or a “credit elsewhere test,” which determines if the borrower is unable to acquire a loan without a federal guaranty.

Fresno First Bank, which has been one of the region’s top SBA-certified lenders for some time, tells applicants on its website to assemble and send needed documentation (application, payroll documentation, beneficial ownership form, etc.) to an email address “so that we may process your request timely.”

Steve Miller, president and CEO of Fresno First Bank, said in a late Friday morning email that they are still waiting for clear SBA guidance on the program, so they are not processing applications “as of now.”

Dennis Woods, president and CEO of United Security Bank in Fresno, reiterated that guidance on the program is not yet clear, but he’s hopeful his bank could start accepting applications for the Payroll Protection Program as soon as next week.

Woods acknowledged the program “is a much needed lifeline for the smallest businesses who are the most vulnerable, with employees on the low end of the pay scale who are also the most vulnerable.” But he wondered how much help it could be for businesses that are not currently operating.

The program stipulates employers have to rehire 90% of their payroll to get these loans, which represent two months of payroll expenses. For businesses such as retailers, nail salons and others that are shuttered due to shelter-in-place restrictions, what will these employees do if they are back on the job?

“It’s not the panacea everyone thinks,” Woods said.

He also thinks the first wave of funding may not last more than a week or two before it is depleted. While small businesses could start applying Friday, independent contractors and self-employed people can start to apply for the loans on April 10.

Woods believes there will be some kinks worked out between now and then. The banking veteran also believes there will be more money appropriated to this program as time goes on, so people who miss this round shouldn’t panic too much.

“This is a trial balloon,” he said of the program rollout. “The next tranche will be better than the first tranche.”

He said the money could end up in the hands of business owners as early as next week.

Jim Ford is president and CEO of Central Valley Community Bank in Fresno, which is another major existing SBA lender in the region. He couldn’t be reached for comment Friday, but said in an interview on Monday “the best thing for people to do is reach out to their bank. If the bank says they don’t know what you are talking about, find a preferred [SBA] lender.”

He said his bank is also working with its existing customers to offer relief on current loans, such as deferring payments and rearranging terms. He said as of last week, 60 customers had already been approved for such help and 90 more were in the process.