Published in Small Business

Michigan small businesses access more than $10 billion in SBA relief funding

BY Sunday, April 19, 2020 05:29pm

The U.S. Small Business Administration approved relief loans totaling $10.38 billion for nearly 43,500 small companies in Michigan before running out of money.

Those loan applications from around the state came from banks participating in the $349 billion Paycheck Protection Program, said Rob Scott, Great Lakes regional administrator for the SBA.

Rob Scott, the SBA’s Great Lakes regional administrator COURTESY PHOTO

“Certainly it was a very heavy lift for our agency,” Scott said today during a media conference call.

Scott could not say how many loans applications were left pending with banks to process when the SBA ran out of funding for the PPP on Thursday morning and stopped taking applications.

Congress created the PPP as part of the massive $2.2 trillion CARES Act enacted in response to the COVID-19 pandemic. Talks in Washington, D.C. have focused on putting another $250 billion into the PPP, Scott said.

The SBA got the program up and running within a week of the CARES Act becoming law, although Scott said the rollout has had its problems.

“Was it a perfect process? No,” Scott said.

Constance Logan, director of the SBA’s Detroit district, believes the process will improve if the agency gets further funding for the PPP.

“We’re looking forward to, if Congress should allocate additional funds to doing this again, we have some lessons learned. I would say it’s only going to get better and we responded as quickly as we could to small business owners,” Logan said.

Many of the complaints about the PPP have come from small business owners frustrated by how their bank handled the process and bottlenecks in the system.

Scott said the SBA had about 3,200 banks involved in its lending program, about 1,500 to 1,800 of which were “really active” and ranging from 10 to 20 deals a year to more than 1,000 annually.

Congress and President Trump wanted all banks to participate in the PPP, not just those that were already involved in SBA lending. More than 5,000 banks nationally were involved in the PPP, some of which had never done SBA lending and did not have staff with expertise, he said.

The SBA did create a special program for those banks to enter customers’ application into the agency’s system, Scott said.

Reports as well have touched on how some large banks do not expect a large enough return to take on the cost and risk of the PPP loans.

Scott said the potential to use the PPP to keep their small business clients afloat should provide banks plenty of incentive. Banks are receiving a fee to handle the application process, he said.

Even if banks “don’t make a lot of money on it, they are at least saving their customers,” Scott said.

“The lenders, especially the bigger lenders, if they could get a process down, they could actually make some decent money,” Scott said. “Additionally, the lenders that are doing this, it’s also to help their customers. All of their customers are hurting, and if their customers go under without the assistance the federal government is providing through this program, how does that serve the banks’ interests if they have a customer that goes into bankruptcy or is not succeeding?

“It’s very advantageous for bigger banks to get into the game.”

A part of the PPP volume in Michigan came through credit unions.

The Michigan Credit Union League reported Thursday that an estimated 50 member credit unions closed on $750 million in loans from more than 7,500 small businesses. Loans have averaged about $100,000.

The MCUL said that most credit unions had taken loan applications “despite the trouble and frustration with the SBA’s current system” and that “these businesses have been particularly challenged in gaining access to the emergency payroll loans.”

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