Paisley Pear Wine Bar, Bistro & Market co-owner Shaun Musil said Sunday that his application this weekend for a Small Business Administration loan hit some snags but appears to be back on track.
Musil said his banker told him he should be able to get the loan processed Monday, with some minor changes.
“I think everything’s in process,” said Musil, also the mayor of Hays, who has a front-row view of Main Street and the temporarily shuttered businesses from his store at the corner of 11th and Main.
“It’s been unbelievable for all the small businesses,” he said. “To me that just is huge for Hays, the way people have tried their best to support all the small businesses.”
Speaking Sunday evening during a Zoom meeting hosted by U.S. Sen. Jerry Moran, Musil reported to about 20 other government and business leaders on the workings of the SBA loans being extended as part of the $2 trillion COVID-19 stimulus package just passed by Congress.
“The frustrating part is, when you’re a small business owner, we’re trying to keep open, it’s almost daily the applications change,” Musil said. “There’s a lot of money out there to kind of help us pay our employees; we’re trying to keep as many employees available to not only help our community but our business.”
So far, the SBA has approved 30,000 loans totaling $9 billion, saving some 900,000 jobs, Moran said.
“We’ve had lots of challenges though, to get our banks, our lenders, into the portal, to be able to make those SBA loans, and there’s been lots of glitches,” he said, noting he’s hearing from a lot of small business owners.
“Most of our business in rural towns, smaller than Hays, but Hays included, often are hanging on by the smallest of margins and any kind of setback may mean that they won’t stay in business or they can’t return to business,” said Moran. “So we want to get this right.”
Bank of Hays CEO Randy Walker, also in the meeting virtually, said the loan process has gone well.
“We started processing applications Friday morning and I think everybody that has submitted an application through us, as of right now, has been processed,” Walker said. “So we’ve just not had any of the bad experiences that we’ve read about in the newspapers and online. Quite frankly, for us it’s worked perfect.”
“We processed over 130 loans, and approximately $27, $28 million in dollars, maybe closer to $30,” said Bank of Hays chief financial officer John Clarke in the meeting. “We processed some more this morning.”
Participation is a concern of some Kansas bankers, said 111th District Rep. Barb Wasinger.
“There are a lot of smaller banks that don’t have larger IT personnel that aren’t getting through to SBA,” Wasinger told the ZOOM group. “They’re concerned that not just rural Kansas, but a lot of rural communities, may miss out on some of the SBA funds as they disappear.”
The program, which provides economic and payroll assistance to businesses with 500 or fewer employees, is bigger than anything SBA has ever undertaken, Moran said.
“The magnitude of what the SBA has been asked to do is gargantuan when compared to what their normal loan programs are,” he said. “We’ve broadened who’s eligible for a loan and we’ve certainly done it at a time when almost everyone needs one.”
Jordan Ebert, legislative assistant for Moran, said the biggest issue is that the agency normally does about $30 billion in lending and now is doing $350 billion in a matter of weeks.
“The overload on the capacity of the system, there’s been a ton of tech questions, and it’s not unique to a particular size of the bank,” Ebert said. “I think there’s a lot of concern about the overall demand for this money that’s out there and the concern that if we’re not able to get our loans out the door right away, that we’ll miss out on that $350 billion.”
Ebert said he’s been told that most of the problems should be resolved by Tuesday or Wednesday.
A list of certified lenders having trouble was being turned in to SBA on Monday, he said, to get Kansas lenders high up on SBA’s queue to start processing loans as soon as possible.
Moran said there are about 40 banks in Kansas that historically have been SBA lenders.
Non-bank lenders that don’t already have a relationship with SBA, however, will be the last ones to gain access, Ebert said, but ultimately they will.
The loan program to small business is one of the most important of the stimulus package, Moran said. But everyone is concerned the funds will run out.
With $9 billion loaned in just three to four days, that’s on the radar, said Ebert.
“That’s probably going to exponentially increase,” Ebert said. SBA has indicated, he said, that “whenever it is starting to reach full capacity and those funds are diminished that they are going to start flashing the warning lights to Congress.”
Moran said the expectation in Washington is that the loans will be paid off within 90 days, for the portion related to payroll, rent and mortgage payments.
“Do you think banks intend to hold these loans longer, or they’ll be sold in a market?” he asked Clarke from Bank of Hays.
“I don’t think so,” Clarke said. “They’re only carrying a 1% rate. To sell it in a secondary market, my guess is you’d have to sell them at a loss.”
It’s possible the idea is to sell it into a secondary market, perhaps one created by the federal government, Moran said.
Clarke indicated the balance of the unforgiven loan will be minimal, and repaid by SBA within eight weeks of making the loan.
“It’s our understanding we can get paid by the SBA on the forgiven part, and that will be most of the loan,” he said. “So there won’t be much of an outstanding balance if the majority of the loan is forgiven within the 90 days.”
Moran told the Zoom participants that taking the right steps now will determine the future of Kansas communities.
“We are trying to convey what is going on in Kansas to leaders and others in Washington, D.C.,” he said, “to get us to a point where they are making decisions that are beneficial for us, and that the places that we all come from are not forgotten in these circumstances.”