Small Business Loans Potentially Overwhelm Banks with Demand

Jim Donnelly, the chief commercial officer of Bangor Savings Bank in Maine, said his small staff was working around the clock to accommodate the pent-up demand. In a typical year, his bank handles hundreds of business loans. He expects to process thousands in the coming months.

And even though his bank was still waiting for critical technical information, it planned to start taking loan applications on Friday.

“We have local businesses like restaurants that have shut down and are looking at these loans as a way to reopen their doors,” he said.

Many of the nation’s largest banks said they planned to offer the loans, though some will restrict which applicants they will work with.

JPMorgan Chase, for example, said it would make the loans available to customers with Chase business checking accounts as of Feb. 15. Bank of America and Citi both said they planned to participate but did not yet have details.

The Treasury has encouraged non-bank lenders to also offer the loans, but some that want to do so say the process has been maddening. Kabbage, one of the biggest online lenders, said the system for becoming an approved lender was opaque.

Mr. Street, at United Midwest Savings Bank, was also desperate for more information, including details about how thoroughly banks are expected to scrutinize potential borrowers. Any choice involves trade-offs: Quick approvals and cash disbursements raise the risk of mistakes and borrower fraud, but rigorous underwriting takes time that desperate business owners and overtaxed bankers don’t have to spare.

Article source: https://www.nytimes.com/2020/04/02/business/small-business-coronavirus-stimulus.html