Round 2 of Paycheck Protection Program frustrates Colorado lenders, small business owners

When Round 2 of the federal Paycheck Protection Program opened Monday with another $320 billion, it came with a bundle of new guidelines to ensure the loans reach the small business most in need and a new set of hair-pulling problems for lenders and applicants alike.

Unlike the $349 billion Round 1, where delays were caused by lack of clarity around how the rapidly erected program should work, this time delays stemmed from the U.S. Small Business Administration’s E-TRAN system, used for processing loan applications being filed by banks.

“There was a glitch with the system that kept kicking bankers out,” Jenifer Waller, president of the Colorado Bankers Association, said Tuesday. “I talked to one banker who was continually kicked out of the system all day until 9 p.m. So he and his staff worked all through the night to process all of those loan applications.”

Elizabeth Dobers, the executive director in charge of the small and medium-sized business segment for BBVA, a bank with 37 branches in Colorado, was clearly frustrated Monday afternoon. In a statement sent to The Denver Post, she said, “We’re ready to fund as soon as the SBA is ready to take our applications.”

Colorado Enterprise Fund President and CEO Ceyl Prinster heard from trade groups Monday that a large backlog of applications that had accumulated dating back to last round of the PPP contributed to the technological failures. Some banks were inputting thousands of applications at once, bogging down the system.

“It was very slow. It kept kicking us out of the applications, off the whole website. It was very frustrating,” she said Tuesday. “It’s going better today, but we’re still having trouble. There are a lot of system timeouts, unfortunately. I empathize with the SBA. They’re trying the best they can.”

On Tuesday morning, the Small Business Administration told lenders they could no longer use robotic processing automation — a computerized substitute for human data entry — for loan applications.

“Without RPAs, the loan processing system will be more reliable, accessible, and equitable for all small businesses,” read an SBA newsflash sent out to lenders.

With backing from community foundations, the state economic development office and FirstBank, Prinster’s Colorado Enterprise Fund and fellow nonprofit lenders Colorado Lending Source and DreamSpring now have cash on hand for making loans. An emergency meeting was called Saturday to address the lack of liquidity for the lenders that specifically work with the state’s smallest companies, including many that are minority- and woman-owned.

Prinster said her organization, which filed just one loan in the first round of the PPP after having trouble logging in to the federal system, has about 350 applications for this round. The average company applying employs six people and is seeking around $37,000 from the loan fund meant to cover payroll expenses for 2.5 months. In total, the Colorado Enterprise Fund’s current stack of applications added up to $12.5 million worth of funding requests.

After some big companies sucked up tens of millions in funding from the first PPP round — with many of them promptly returning it under public scrutiny later — Tony Gagliardi, the Colorado director of the National Federation of Independent Business, was hopeful his members would have better luck in Round 2. Just 20% of NFIB’s Colorado members that applied for the prior round had money deposited in their accounts as of Monday, he said.

“We found unconscionable who some of these loans in the last rounded ended up going to,” Gagliardi said.

As of mid-April, 41,635 loans had been approved in Colorado, good for more than $7.39 billion in PPP money. There is concern that second-round funding won’t last a week, let alone the 13 days of the first round, and Colorado businesses that waited to apply will miss out.

As of 11 a.m. Tuesday, more than 475,000 loan applications had been approved from around the country, for a total of $52 billion, Dan Nordberg, the SBA’s regional director based in Denver, announced via email.

But some banks are already turning would-be applicants away. The SBA issued guidance over the weekend capping the amount of money some big banks could lend at $60 billion. Some customers of those banks who got in late are now left looking for a second option.

Carol Ferguson, owner of the Signet Jewelry Boutique in Cherry Creek, banks with Chase and didn’t have her paperwork ready in time to apply in the first round. When she reached out to her local branch manager on Monday she was told she would have to apply elsewhere because Chase’s pipeline was already full of pending applications.

Thanks to guidance from an SBA counselor, Ferguson has filed an application through Kabbage, an online loan originator, and her application is being reviewed.

“I guess I’m underbanked because my bank decided not to help me,” Ferguson said.