Sacramento Business Journal: Matsui demands that Sacramento lenders approve more PPP loans
U.S. Rep Doris Matsui sent a letter to Sacramento lenders Tuesday, urging them to get small business aid distributed as quickly as possible.
The Sacramento Democrat demanded that financial institutions get to work immediately to disburse funds authorized under the $2 trillion Coronavirus Aid, Relief, and Economic Security Act, or CARES Act.
Included within the CARES Act is the Paycheck Protection Program, which will provide $349 billion in Small Business Administration-backed loans to businesses hurt by the COVID-19 pandemic. The loans will be forgiven, and essentially converted into grants, for borrowers who keep all employees on their payroll for eight weeks.
However, when the application window for the PPP opened last Friday, it was marked by confusion and chaos. Bankers distributing the loans reported that they received continuously changing direction from the SBA and U.S. Treasury Department throughout last week and even through Friday as they began receiving applications. The SBA's own systems crashed as they were overwhelmed with loan applications. And many banks, overwhelmed with demand, chose to process applications only for businesses that had previously been clients.
In her letter, Matsui said that banks also established overly strict lending standards, undermining the program's intent.
“Unfortunately, I have heard alarming feedback from small business owners in my district who report that their applications have been denied on the basis of restrictive PPP loan criteria established by individual banks or lending institutions," she wrote. "In the middle of a public health crisis, this is simply unacceptable.”
Matsui called on lenders to ease “lending criteria and immediately provide loans to small businesses affected by the COVID-19 pandemic.”
In Washington on Tuesday, U.S. Treasury Secretary Steven Mnuchin asked lawmakers to approve an additional $250 billion for the PPP.
In her letter to lenders, Matsui wrote that for “the PPP loans to work as intended, they must get to small businesses as quickly as possible. When banks or lending institutions restrict these loans to existing customers and those with active lines of credit, credit cards, or business loans, they undercut the effectiveness of the PPP loans and risk exacerbating economic damage in the Sacramento region.
“Unnecessarily narrow lending standards will limit the amount of federal funding that flows to our community and will lead to more layoffs and business closures. The PPP loans provided by Congress in the CARES Act are federal-backed and meant to be provided to those who need them most. In light of widespread PPP loan application rejections throughout the Sacramento region, I call on you to immediately re-evaluate your lending criteria for this crucial federal program.”
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