Small-business loan program resumes with new funding as the Lakers return money received in first tranche

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Sen. Marco Rubio (R-Fla.), one of the creators of the Paycheck Protection Program, warned that demand far exceeded the money Congress authorized last week. Above, during his presidential campaign ahead of the 2016 election. (Associated Press)

The small-business loan program that received a new infusion of cash last week reopened with a sputter Monday as the Lakers became the latest high-profile name to return money received under a program designed to boost small, struggling companies during the COVID-19 pandemic.

Despite early glitches and overwhelming demand, the Small Business Administration processed more than 100,000 Paycheck Protection Program loans by more than 4,000 lenders as of 3:30 p.m. Eastern time. Some participating lenders reported trouble accessing the SBA application website.

Twice as many users were trying to access the application website Monday compared with at any time during the first round of the program, SBA administrator Jovita Carranza said.

President Trump on Friday signed the bill that gave the program $310 billion in new funding on top of the $349 billion that Congress authorized last month, which went out the door in days. Now there is a risk the program could run out of funding a second time even more quickly.

Sen. Marco Rubio (R-Fla.), one of the creators of the Paycheck Protection Program, warned that demand far exceeded the money Congress authorized last week.

“The hard truth is that extraordinary demand is even higher,” Rubio wrote on Twitter.

Ohio-based Fifth Third Bank warned applicants in an email that “given the overwhelming number of applications already submitted to Fifth Third Bank and other lenders across the United States, it is highly unlikely that all applicants will receive funding.”

The intense demand for the small-business program comes as several large companies have returned loans they received in the program’s initial days. The Lakers on Monday said the franchise would return $4.6 million.

The Lakers — like Shake Shack, Ruth’s Chris Steakhouse, Potbelly and a handful of others — faced a backlash on social media and from lawmakers and Trump.

The SBA revised its guidance last week to make clear that large, publicly traded companies with other financing options should not apply for the loans and warned that recipients may be asked to certify that the money was necessary to maintain operations. The Treasury Department urged any companies that received loans and cannot certify such a need to return the money by May 10.

So far, more than $2 billion in first-round funding was either declined or returned, Carranza said. A list of all recipients of PPP loans has not been released, although some publicly traded companies disclosed the information in filings.

Democrats on Capitol Hill demanded that the program develop safeguards to ensure that the money reaches businesses that are truly small and truly need it. The loans are forgivable if employers agree to keep on most workers during the pandemic.

“Every loan that provides a windfall for an applicant who does not truly need it results in one fewer loan made to a struggling small business owner whose employees could be truly helped by this funding,” several Democratic senators wrote in a letter to Carranza and Treasury Secretary Steven T. Mnuchin.

Bank of America CEO Brian Moynihan said on CBS’ "Face the Nation" on Sunday that the bank had $50 billion in applications ready to go when the program went live at 10:30 a.m. Eastern time Monday. JPMorgan Chase had 150,000 applications prepared.

“Our member banks across the country are deeply frustrated at their inability to access [the] system,” American Bankers Assn. President Rob Nichols said in a tweet. “We have raised these issues at the highest levels. Until they are resolved, America’s banks will not be able [to] help more struggling small businesses.”

In addition to the criticism that large companies have been able to access the program, the Trump administration also has been under fire for allowing large banks to access the program more easily than smaller ones. Banks have also favored their clients, leaving out microbusinesses or entities without a preexisting banking relationship. The latest funding bill earmarked $60 billion for such companies, which complained of being shut out during the first round.

Rubio said some of the delays banks experienced Monday were related to a new "pacing system" meant to ensure that all banks would be able to submit applications instead of just a few.

Entities that receive the funding will soon have to confront the federal government’s rules surrounding whether the loan will have to repaid or will be forgiven. The program was designed to forgive the loan if employers maintain at least their pre-pandemic payroll for eight weeks after the loan is given.

For some employers, that clock has already started even as many states remain under stay-at-home orders. That could make it difficult for employers — such as a restaurant owner — to pay a full roster of employees.

The eight-week rule “is very restrictive for many small-business owners who aren’t up and running yet. The rehiring back to pre-crisis levels is a heavy lift for many businesses,” said Holly Wade, director of research and policy analysis at the National Federation of Independent Business.

The group is looking for clarity on those rules from the SBA and the Treasury.

“Many small-business owners are in the eight-week period now,” she said. “They have questions about payroll, definitions of expenses,” and other questions about how the forgiveness rules work.

Times staff writer Russ Mitchell in Berkeley contributed to this report.

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