Local lenders scramble to process surge of SBA loan applications

1617 Mineral Spring Ave. (1974)OWNER: Pawtucket Credit UnionTENANT: Pawtucket Credit Union
PAWTUCKET CREDIT UNION has been among local lenders scrambling to process loan applications for a federal COVID-19 relief program. / PBN FILE PHOTO

PROVIDENCE – Questions continue to emerge as local lenders scramble to keep up with the flood of applications pouring in from small businesses seeking forgivable loans through the U.S. Small Business Administration’s Paycheck Protection Program.

Among them: how exactly do the federally insured banks and credit unions close the loans that have been approved and get that money into the hands of borrowers anxiously awaiting this much-needed lifeline?

As of Monday morning, Rhode Island-based lenders had submitted more than 700 PPP loans totaling $250 million to the SBA, according to the Rhode Island District Office. But it was unclear how many, if any, of those were at the final closing stage and how long after closing borrowers could expect to receive the funding for their payroll and operating expenses.

We are all waiting still with a bit of bated breath because we keep hearing SBA will be issuing a standard note agreement for these loans,” said Justin DeShaw, senior vice president and chief lending officer for Centreville Bank. 

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While the SBA has referenced such an agreement, there was no final word as of Monday afternoon. With that in mind, Centreville was also preparing its own version of a closing loan agreement based on that for the SBA’s flagship 7(a) loan program, DeShaw said.

Uncertainty over the final stages was not slowing the processing of applications, which was well underway at local banks and credit unions.

“The most important thing at this stage is getting approvals,” said George Charette, president and CEO of Pawtucket Credit Union. Charette estimated the credit union had processed and submitted over 150 loan packages since Friday, with lenders working throughout the weekend to keep pace with the surge of applications.

While some national banks struggled to launch their application process when the program was rolled out on Friday, Pawtucket Credit Union was among those up and running early, as were other local financial institutions including The Washington Trust Co., Centreville Bank and Bank Newport. 

“Community banks have shown an ability to adapt more quickly,” DeShaw said. “This is where community banks tend to shine.”

As of 3:45 p.m. Monday afternoon, Citizens Bank had begun accepting applications from customers who signed up asking to be notified when the portal opened. Those who had not signed up would be able to submit their applications shortly, according to a company statement. The Rhode Island-based bank on Monday also announced that $340,000 of the $5 million donated nationally to support COVID-19 relief program will support Rhode Island businesses and funds.

Capacity was a chief issue – both in terms of the capability of the local credit union to handle the number of applications, and the amount of federal funding available. Charette worried that the $349 billion included in the federal stimulus package would not be enough.

While Pawtucket Credit Union was not denying any applicants, regardless of if they had existing accounts, it was “taking care of members first,” Charette said.

R.I. General Treasurer Seth Magaziner issued a statement on Saturday criticizing lenders for delaying processing – or in some cases denying applications altogether – for applicants who were not existing customers. 

But many banks continued to say that customers are their first priority.

Bank of America, which originally limited applications only to those with existing lines of credit, has since extended its offer to all business account holders. As of Sunday night, Bank of America had received 171,000 applications seeking $32.2 billion in loans, according to spokesman Bill Halldin.

Washington Trust, which certified eight additional lenders to submit applications to the SBA over the weekend, was also moving ahead first with existing customers, though it was not denying anyone, according to Elizabeth Eckel, a spokeswoman. There were also additional regulations involved in lending to a non-existing customer which complicated the process, Eckel said.

Marc Streisand, owner of Marc Allen Fine Clothiers in Providence, didn’t fault lenders for working with existing customers first. In fact, he appreciated the loyalty shown by his bank, BayCoast Bank, which submitted his application for the payroll relief loan on Friday.

Streisand was hopeful to receive his loan of more than $100,000 in the next week, but like many borrowers, was unsure exactly when that money would arrive.

Also complicating the already chaotic process are technical issues with the online portal through which lenders submit applications. After successfully submitting about 70 applications on Friday and through the weekend, DeShaw reported that the portal appeared to be “locked up” on Monday afternoon, perhaps because of an overload of activity.

Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com.

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