Feeling the heat, Bank of America eases criteria for small business loans in pandemic

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Bank of America said on Saturday it was expanding the list of eligible customers for a government-sponsored stimulus program designed to provide loans to small businesses hit hard by the nation’s pandemic-related economic collapse.

The move follows strong criticism from Bank of America customers that the country’s second-largest lender was not processing claims properly when the program began Friday morning.

In a statement, Bank of America said it had essentially reduced the eligibility requirements for applying for loans that initially confused and angered many customers. The bank will now accept applications from small businesses if they had an individual or business checking account as of February 15 of this year, provided they do not have a borrowing or credit relationship with another bank.

As FOX Business reported, Bank America customers say they were turned away from the program if they didn’t meet more stringent requirements, such as having a business relationship and a credit card with the bank.

Katie Miller fills in shipping details for a March 31 order at Tennessee Valley Pecan Co. in Decatur, Alabama (Dan Busey / The Decatur Daily via AP)

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FOX Business earlier this week reported unrest among the bank’s customers, who said they had been wrongly dismissed from the $ 350 billion small business loan program.

Small business loans are seen as an integral part of the government’s stimulus efforts in the event of the $ 2 trillion pandemic, as businesses with fewer than 500 employees make up nearly 50% of the U.S. workforce.

Confusion at the banking level has been compounded by a bottleneck in government over lending rules. The Treasury Department, the main agency overseeing the lending program, had only issued guidelines to banks on Thursday evening, just hours before lending began on Friday morning.

President Trump, however, praised Bank of America’s efforts in a tweet later Friday afternoon, saying bank officials were doing a “great job” in handing out the loans despite numerous complaints.

It’s unclear why the president singled out Bank of America among the nation’s top banks, other than the possibility that the company would be the first major financial institution to open the program on Friday morning, while others like JPMorgan Chase began to grant loans later in the day.

Small businesses have been ravaged by the economic downturn that followed the country’s massive quarantine to prevent the spread of the novel coronavirus; quarantines continued as the death toll from the virus rises, raising unemployment to levels not seen since the Great Depression of the 1930s.

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In order to avoid a complete economic collapse, loans to small businesses are designed to keep salons, restaurants and the like open while retaining much of their workforce until the spread of the economy. virus calms down and the economy can start to return to normal.

Under the plan, these companies can apply for low-interest subsidized federal loans for the lesser of $ 10 million or a percentage of their payroll. The government will repay loans made by the bank in full if the company maintains its workforce.

A Bank of America spokesperson declined to comment on its eligibility flip-flop other than saying the lender is operating under new criteria that will increase the number of customers eligible for loans.

“Now that the SBA and Treasury have shared key implementation details and made significant changes to the program, I expect banks of all sizes to participate and provide this important financial lifeline for small businesses. American Bankers Association president Rob Nichols told FOX Business.

A spokesperson for the Treasury Department declined to comment beyond pointing out the “unprecedented” nature of the program and pointing out that billions of dollars in loans were recorded on day one.

But even as Bank of America expands eligibility for its loans, other more systemic issues are cropping up across the program. And many have to do with hesitant Treasury Department directives.

Bank of America employees told FOX Business that Treasury guidelines on eligibility remain unclear.

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Another potential problem is that business owners weren’t told when they could actually get their hands on the money they were promised. And even bank officials aren’t quite sure what the answer is.

“We don’t want to fire people, but we might not get that money on time,” a small business owner told FOX Business. “There is a profound lack of clarity on the timeline. “

As a result, while the bill is supposed to provide immediate economic relief, it could actually take weeks or maybe a month or more for the money to get to businesses that need financing.

Other business owners told FOX Business they were concerned the money might not be enough to support their current workforce as the loan terms are based on 2019 payroll figures and their workforce is considerably more important this year.

Of course, providing $ 350 billion in loans to small businesses – which is the target number of the government’s economic pandemic relief effort – was never meant to be transparent.

According to a person familiar with the policy-making process, who spoke on condition of anonymity, “there will be problems initially given that the program has been rolled out so quickly, but that doesn’t mean it will become. Healthcare.gov“, the controversial website created to manage President Obama’s healthcare initiative, which was plagued by technical errors when it launched in 2010.

Even as questions swirl over the effectiveness of the small business lending scheme, White House officials are considering another round of small business loans, which means tens of billions more may be added. on the program because the demand is so important.

As of Saturday afternoon, several thousand applications had been processed for about $ 2 billion in loans, the Wall Street Journal reported, but that amount underestimates the size and scope of the demand, told FOX Business people with direct knowledge of the subject.

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