Can The SBA Handle The Stimulus On Their Own?

As the market cheers the upcoming passage of a $2 Trillion stimulus bill that is intended to provide much needed support to small businesses, industry insiders are beginning to raise concerns about the SBA’s infrastructural ability to process applications in a timely manner.

In a webinar hosted by LendIt Fintech yesterday, Opportunity Fund CEO Luz Urrutia estimated that conservatively, it could take the SBA up to two months to even begin disbursing loans offered by the bill. Kabbage President Kathryn Petralia offered the most optimistic estimate of 10 days, while Lendio CEO Brock Blake thinks that perhaps it could take around 3 weeks.

Blake followed up the webinar by sharing a post on LinkedIn that said that small businesses were reporting that the SBA’s website was so slow, so riddled with crashes, that the SBA had to temporarily take their site offline.

Most skeptics raising alarms are not referring to the SBA’s staff as being unprepared, but rather the systems the SBA has in place.

A March 25th tweet by the SBA reported that the site was undergoing “scheduled” improvements and maintenance.

This all while the demand for capital is surging. Blake reported in the webinar that loan applications had just recently increased by 5x at the same time that around 50% of non-bank lenders they work with have suspended lending.

Some informal surveying by deBanked of non-bank small business finance companies is finding that among many that still claim to be operating, origination volumes have dropped by more than 80% in recent weeks, mainly driven by stay-at-home and essential-business-only orders issued by state governments.

It’s a circular loop that puts further pressure on the SBA to come through, none of which is made easier by the manual application process they’re advising eager borrowers to take on. The SBA’s website asks that borrowers seeking Economic Injury Disaster Loan Assistance download an application to fill out by hand, upload that into their system and then await further instructions from an SBA officer about additional documentation they should physically mail in.

Perhaps there’s another way, according to letters sent to members of Congress by online lenders. 22 Fintech companies recently made the case that they are equipped to advance the capital provided for in the stimulus bill.

“We seek no gain from this crisis. Our only aim is to protect the millions of small businesses that we are proud to call our customers,” the letter states.

Members of the Small Business Finance Association made a similar appeal in a letter dated March 18th to SBA Administrator Jovita Carranza. “In this time of need, we want to leverage the experience and expertise we have with our companies to help provide efficient funding to those impacted in this tough economic climate. We want to serve as a resource to governments as they build up underwriting models to ensure emergency funding will be the most impactful.”

How fast things come together next will be key. The House is scheduled to vote on the Senate Bill today. If a plan to distribute the capital cannot be expedited and the crisis drags on, the consequences could be dire.

“Hundreds of thousands of businesses are going to be out of business,” Urrutia warned in the webinar.

Sean Murray is the President and Chief Editor of deBanked and the founder of the Broker Fair Conference. Connect with me on LinkedIn or follow me on twitter. You can view all future deBanked events here.