By Ray Birch
TREVOSE, Penn.—After the significant problems and glitches lenders experienced with the first round of the Small Business Administration’s (SBA) Paycheck Protection Program, business lending experts say round two—thankfully—is an improvement—sort of.
But credit unions and CUSOs now filing PPP applications on behalf of member companies are divided over just how much improvement has been made, with one noting the SBA’s site crashed all day on the first day the second round of applications were being accepted, and a special window reserved for smaller lenders such as credit unions to file small business applications did not live up to expectations.
Despite reports from around the country indicating lenders were again having trouble early in the second wave of funding entering loan requests into the SBA system and having them approved, Mark Ritter, CEO of Member Business Financial Services (MBFS) said in his experience round two “is the exact opposite” of round one.
It’s Gone ‘Fabulously’
“What I am going to tell you is what you likely will not expect to hear,” Ritter told CUToday.info Wednesday. “Other than Monday’s initial SBA systems crash, round two has gone fabulously.”
Ritter said MBFS had worked with 34 credit unions by Wednesday and that all applications for the second phase of funding were successfully submitted with the SBA and received authorization.
“And when those requests were completed we still were able to take care of additional members who’ve been calling in and asking for PPP loans,” said Ritter. “So, what we are experiencing this time is the exact opposite from the first round of PPP loans.”
Ritter said he and his organization were caught off guard by the performance of the SBA in round two, in which another $310-billion has been made available for the loans that essentially become grants that don’t need to be repaid if the recipient business maintains employee headcount.
“After the way round one went, with all the PPP funds being exhausted quickly, we thought that in round two the dollars might be gone in a matter of hours,” explained Ritter. “The pacing system the SBA has set up for round two has been a godsend to credit unions and community lenders.”
‘Not Drowned Out’
As CUToday.info has reported, the pacing system was established by SBA to prevent large organizations from flooding the system with applications. The pacing mechanism prevents any one lender from submitting thousands of loans an hour into the E-Tran system; if a lender exceeds the pacing limit, it is timed out.
“Credit unions this time are not getting drowned out by people shoving through thousands of applications using bot technology and other systems to work around the system,” Ritter said.
As CUToday.info previously reported, the SBA has also announced restrictions on the use of robotic processing automation (RPA) as a means of entering loan applications into the Paycheck Protection Program.
“RPAs burden the processing system and diminish its capabilities,” SBA said in a message to lenders. “Without RPAs, the loan processing system will be more reliable, accessible, and equitable for all small businesses.”
The SBA said it is still permitting lenders to submit PPP applications through application programming interfaces, or APIs.
‘Stunned’ by Turnaround
Ritter said he was “stunned” by the turnaround in the PPP process. He attributed that not only to the pacing system, but also to the SBA having some time between rounds to take a hard look at the PPP system and determine what’s needed to make it work correctly.
“Really, the best thing that could have happened is the money being exhausted quickly in round one,” suggested Ritter, who added the big money requests granted in round one are now satisfied. “That gave the SBA time to evaluate this process—time they did not have at the beginning when this was rushed through.”
The SBA, too, has been much clearer this time about the rules of the PPP process, according to Ritter.
“I received the (PPP) application with vague oversight at 6:53 a.m. in the morning the day that this program first went into effect,” recalled Ritter. “This time we understand the rules and are able to process the loans with the right guidance. This is a much clearer format—before the rules were changing every single day—that first week the rules around non-profits and churches changed daily. This time the SBA had the chance to reset and get their feet under this program.”
Day of Crashing
However, as CUToday.info reported, many lenders were reporting issues with the PPP program—specifically it’s E-Tran system—as it was brought back online Monday. NAFCU and CUNA joined with eight other financial services trade groups early this week to urge the SBA and Treasury Department to work together to improve the E-Tran system.
“The system just kept crashing, all day long,” Michael Lussier, president and CEO of Webster First Federal Credit Union, told The Hill in a report that was published Tuesday.
“It is still clunky, it is still slow, it is still up or down,” Richard Williams, president and CEO of Essential Federal Credit Union, told CNN Tuesday.
And Maggie Sayer, president and CEO of Keys Federal Credit Union, mentioned to CNN her credit union was only able to submit one application Monday because of crashes, but the process improved on Tuesday.
Higher Marks 
Shane Knighton, CEO of Member Business Lending in Utah, who spoke with CUToday.info Thursday, gave the SBA higher marks for its second attempt, but still said issues remain.
In addition to big problems with accessing the SBA site on Monday for his credit union clients, Knighton said it has taken a while for the SBA’s system to begin performing in round two.
“It’s been mixed,” said Knighton about the performance of the SBA and the agency’s website. “Good in some ways, bad in others—the SBA is still throwing us curveballs. For example, yesterday they informed us just hours before they flipped the switch on the decision to allow only smaller businesses to apply for a certain time.”
As CUToday.info reported, on Wednesday the SBA restricted loan applications for PPP to institutions of $1 billion or less in assets from 4 p.m. to 11:59 p.m. ET on Wednesday. According to the agency, the reserved processing time was to ensure access to the PPP “for the smallest lenders and their small business customers.”
“That affected us,” said Knighton. “We are a lender service provider and that shut us out for that period—despite the fact we have 10 credit unions under that $1-billion threshold.”
‘Better Success’
Knighton said SBA’s E-Tran system finally began working fairly smoothly by noon on Wednesday.
“I would say round two has been better than round one because the money has been stretching out longer,” he said. “And I think credit unions are having better success with the SBA Connect interface this time—so I say it’s better this time in many respects and not so good in a couple of areas.”
Ritter said he is relieved the SBA process is moving much more smoothly now, not only to get money into the hands of small businesses that need it, but to also protect the reputation of credit unions as solid business lenders.
Noting it can be difficult for some credit unions to compete with big banks on commercial lending, Ritter said being able to come through for members during these difficult times “certainly gives us a seat at the table.”
As CUToday.info reported here http://www.cutoday.info/THE-feature/SBA-PPP-Loan-Process-Like-Playing-Whack-A-Mole , Bill Burke, CEO of Day-Air CU in Dayton, Ohio, said he was very concerned his credit union’s reputation as a business lender was being damaged by the failures of the SBA system in round one of PPP. At the time he referred to the loan app process as like playing “whack-a-mole.”