By Natalie Anderson
natalie.anderson@salisburypost.com

SALISBURY — Banks have struggled to quickly receive guidance and then administer billions of dollars in federal funds to small businesses impacted by COVID-19. Now, they face another challenge as the funds were completely exhausted Thursday morning.

Part of the CARES Act relief package is the Small Business Paycheck Protection Program, which provides $350 billion in loans for businesses with 500 employees or less. Additionally, the program provides loan forgiveness if employers can maintain their payroll for eight weeks.

The act also allows for businesses to apply for low-interest disaster loans from the Small Business Administration. On top of the normal billions of dollars in loans granted by the SBA each year, the federal government has asked the SBA to administer billions more within an eight-day period.

Peter Gwaltney, president of the North Carolina Bankers Association, said banks had a “steep learning curve” to overcome in a short period of time. Only 1,700 financial institutions nationwide were certified to be a SBA loan lender. After a week’s time, that number grew to 4,500.

Gwaltney said banks didn’t receive the final guidance on loaning out the money when the funds were made available on April 3 until the night before. This prompted banks to work “around the clock,” he said, to submit applications. And many financial institutions were submitting the applications for days without guidance on how to close the applications.

Gwaltney noted that F&M Bank in Salisbury wasn’t an SBA lender, which meant it had to wait days to get the credentials and be put into the system before it could process Paycheck Protection Program or Small Business Administration loans.

F&M Bank Chairman and CEO Steve Fisher said the financial institution was able to process millions of dollars in PPP loans in less than two weeks. The bank is currently in the process of funding approved PPP loans, which should take about 10 days.

Fisher said the challenges for the bank included the volume of interest for the funds and the added complications of the COVID-19 essential employees working environment.

“The execution of this program is akin to building an airplane while you are in the act of flying it,” Fisher said.

A statement from U.S. Secretary Steven T. Mnuchin and Administrator Jovita Carranza said PPP has provided payroll assistance to more than 1.6 million small businesses in all 50 states and territories. Nearly 20% of the amount approved was processed by lenders with less than $1 billion in assets, and approximately 60% of the loans were approved by banks with $10 billion of assets or less.

“The vast majority of these loans — 74% of them — were for under $150,000, demonstrating the accessibility of this program to even the smallest of small businesses,” Mnuchin and Carranza stated.

In North Carolina, 39,520 small businesses received more than $8 billion in PPP loans by Thursday, according to the SBA.

But the funds running out has created “a sense of loss and emptiness,” Gwaltney said, because bankers wanted to keep working and submitting applications for business owners.

On the SBA website, a notice states that the SBA is unable to accept new applications at this time for the PPP or the Economic Injury Disaster Loan Program. But loans already submitted will continue to be processed on a first-come, first-served basis.

The N.C. Bankers Association, as well as the U.S. Chamber of Commerce, has been calling on Congress to fund another wave of money for business owners.

“(Congress) knew this money was going to run out,” Gwaltney said, contrasting the situation to a government shutdown that lacks an agreement and swift action.

Elaine Spalding, president of the Rowan Chamber of Commerce, said chambers of commerce have been told to expect the U.S. House to come back into session the first of May to begin allocating additional funds for businesses.

Spalding said local banks have been doing “a wonderful job” and “burning the midnight oil” to get loans processed for business owners.

“They’re a hero in my book,” she said.

In a virtual Small Business Town Hall meeting on Tuesday, U.S. Reps. Richard Hudson, R-8, and Patrick McHenry, R-10, said they were aware the funding would exhaust within a few days’ time. They both said they’re working to extend those funds.

While fielding questions from the virtual town hall attendees, some said they had already experienced a delay in receiving funds from the PPP, had been told the funds were gone or that their banks have limited information on how the programs work. Hudson said it’s a challenge to get the money out quickly because normal channels of funding are not being utilized and the federal government is asking the SBA to “do a lot more than they already do.”

McHenry acknowledged there would be “flaws with the program,” but it was “far better to get it done quickly despite flaws than not at all.”

Some banks, such as Wells Fargo, has paused for 30 days the collection of negative balances existing at the time when stimulus payments are deposited.

Gwaltney said banks in North Carolina will continue to work closely with small businesses to tailor financial solutions for their individual situations.

Until more funding is available, both Gwaltney and Spalding urge applicants to gather all financial documents and records and to not apply at other banks if an application is being processed elsewhere already. They said it’s important to have a good relationship with an accountant and a lending institution, even if not in financial straits, so that customers can always be aware of their options during times like these.

Contact reporter Natalie Anderson at 704-797-4246.