As the federal government readies a second round of funding aimed at shoring up small business payrolls, some southeast Michigan business owners hope their banks are better prepared to get them assistance this time around.
Numerous local business owners reached out to The Detroit News and described failures by their banks to process loans through the U.S. Small Business Administration's Paycheck Protection Program. In some cases, they said, their banks failed to even accept their applications before an initial $349 billion pool of loan dollars dried up last week.
Several pointed to problems with one bank in particular: Comerica Bank, which ranks among the largest in Michigan, by deposits and number of branches. Comerica used to be the state's largest, and was headquartered in Detroit until 2007, when it made the surprise announcement that it was relocating to Dallas.
Among Comerica's frustrated customers is Priscilla McPherson, a billing administrator and maternal infant health coordinator for Detroit-based Crystal Home Health Care. McPherson said she doesn't understand how the company could have missed out on funding from the program designed to help small businesses weather the coronavirus pandemic.
"We're first responders. We're not asking for millions of dollars. We're asking for $300,000 so we can survive," said McPherson. "I don't see how we were overlooked in this process."
But the home health care company's experience trying to apply for the first round of federal loans doesn't leave her feeling confident about a second round of funding that Congress could approve this week.
Comerica did not get an online application portal up and running until Monday, according to emails sent to customers, days after the SBA announced the program had committed all of its funding. As Congress and the White House finalize an expansion of the program, local Comerica customers want results this time around.
"I want Comerica to make us whole," said McPherson, noting Crystal Home Health Care's 36-year relationship with the bank. "I want Comerica to say, 'When this next round comes up, you are going to really honestly be considered for the loan.'"
In response to a request for comment, a Comerica spokesman provided an emailed update about the program. The bank now has a "dual track approach," processing loans through its "traditional underwriting channels" while sending others through its new automated system.
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The bank says it has 1,000 employees working on the program and, as of Monday, had received more than 5,000 applications and has approved $1.8 billion in loans. That application figure, however, would not reflect the customers who say they have been unable to submit an application.
The News asked Comerica how many applications it has processed and the total value of loan dollar requests it has received, but the bank would not provide that information.
Comerica is now queuing up applications in anticipation of a new tranche of funding.
The small-business loans were part of the $2 trillion Coronavirus, Aid, Relief and Economic Security Act signed into law March 27. It made low-interest loans of up to $10 million available to businesses with 500 or fewer employees. The loans are forgivable if borrowers keep employees working for at least eight weeks.
The program launched April 3, and quickly hit snags. With the SBA issuing initial guidance just hours earlier, and some questions about the program unanswered, several major banks were unprepared to begin accepting applications until the following week. Others, including Bank of America, got up and running right away and were hit by a deluge of applications from business owners desperate for assistance.
The loans are guaranteed by the government. Lenders, through which the loan dollars flow, are reimbursed by the SBA.
The SBA's goal was to get funding to businesses quickly. In 14 days, the program provided assistance to some 1.6 million small businesses, according to the SBA and U.S. Treasury Secretary Steven Mnuchin. In that time frame, the agency processed more money than it had in the previous 14 years. In Michigan, it approved more than 43,000 applications totaling nearly $10.4 billion, according to the SBA.
While he said he could not comment on any particular lender, Robert Scott, a regional administrator for the SBA in the Great Lakes Region, said on a call Friday: "If a big bank has never done SBA lending before, I could see how they would be a little timid."
However, he said, some typical SBA rules were loosened and many banks and non-traditional lenders were able to jump into the program.
But while numerous lenders experienced difficulties, some Comerica customers say the bank's handling of the program was egregious.
"There were hiccups all over, but nothing like Comerica Bank," said Charles Green, a Novi-based certified public accountant who attempted to apply for a loan through Comerica himself, and also has tried to help several clients apply.
Several Comerica customers, some of whom would not speak on the record because they were worried doing so would negatively affect outstanding applications, contacted The News about their experiences. They described scenarios in which they contacted Comerica and were repeatedly assured the bank would soon have an online application platform. When that did not materialize, the bank began manually processing applications. But even then, some customers say they were unable to submit applications.
After two weeks of back-and-forth, Comerica notified Green on April 15 that he was on a wait list for a manual application. On Monday, he decided to apply for one of the loans through PayPal, which the SBA authorized to participate and is accepting applications in case the program is reallocated; the process was complete within an hour. Green declined to disclose the value of the loan for which he applied.
Crystal Home Health Care's McPherson said Comerica repeatedly told her they would be able to process her application: "Comerica Bank strung me along the entire time."
Without assistance, she doesn't think her agency will make it another month.
She said the company, which employs 54 people and has an annual payroll of about $1 million, has been struggling to get reimbursements from Medicare and insurance companies. Combined with difficulty procuring personal protective equipment, it is having trouble keeping up with demand for its services. An advance from Medicare wasn't enough.
All of this is happening even as employees have become ill after caring for COVID-19 patients. McPherson said she recently recovered from the virus, and CEO Bob McPherson is still recovering from a serious bout. In all, the company has had seven confirmed cases.
Meanwhile, she has followed news stories about large companies such as Shake Shack and Ruth's Chris Steak House receiving the loans, which has provoked criticism. (Shake Shack said Monday it was giving the money back.) Bloomberg News reported that more than a dozen publicly traded companies with revenue of more than $100 million received loans through the program.
The SBA and Treasury Department have said that nearly three-quarters of the loans were for less than $150,000, "demonstrating the accessibility of this program to even the smallest of small businesses." Still, just 2% of applicants got 30% of the funding, according to SBA data.
And, some lenders have faced claims that they prioritized larger loan amounts rather than processing applications on a first-come, first-serve basis. Numerous banks, including JPMorgan Chase, Bank of America and Wells Fargo are facing lawsuits over such alleged practices, Politico reported Monday.
White House and congressional leaders on Tuesday struck a deal to provide $310 billion in new Paycheck Protection Program funding, as part of a broader $484 billion relief package that could be signed into law this week. The package also adds $60 billion to a separate small-business emergency loan and grant program. Fulfilling demands from congressional Democrats, it provides $75 billion to hospitals and $25 billion for a new coronavirus testing program.
Of the new Paycheck Protection Program allocation, $60 billion is reserved for small- and medium-size financial institutions. The legislation also requires participation by lenders, such as community financial development institutions, that lend to underserved communities.
Borrowers and lenders alike are hoping the second round goes smoother. Among them is Alexander Cohen, CEO of non-bank lender Liberty SBF, which has been processing the applications.
"My hope is that with some fixes," he said, "we'll see a more equitable distribution in the next round."
JGrzelewski@detroitnews.com
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