PROVIDENCE, R.I. (WPRI) – Reacting to reports that some small-business owners are getting turned away from applying for federal stimulus loans, General Treasurer Seth Magaziner has called on lenders to accept all qualifying applicants in Rhode Island.
The treasurer said he’s received multiple reports of “orphaned” small businesses that meet the qualifications of the new federal Paycheck Protection Program, but are getting turned away by U.S. Small Business Administration lenders if they are not pre-existing customers or don’t have a credit card with the financial institution.
“This is unacceptable,” Magaziner wrote in a letter to SBA lenders on Saturday. “I urge all Rhode Island SBA lenders to swiftly review and process PPP applications for all eligible Rhode Island small businesses, regardless of whether they are pre-existing customers or hold other pre-existing products.”
The $349 billion federal program was approved by Congress last month as part of the $2 trillion CARES Act rescue bill. Small businesses with 500 or fewer employees are eligible to apply for federally backed loans administered through the SBA, which can be used to pay for payroll, rent and utilities. Roughly 98% of Rhode Island companies qualify as small businesses under the federal definition.
The loans are effectively grants, as SBA lenders – banks and credit unions – are not required to backstop the money, but are allowed to charge origination fees. Nonetheless, lenders have been forced to start administering the program within a matter of days because it was created so quickly in response to the COVID-19 emergency.
Magaziner, a Democrat, noted that challenge in his letter, but argued it doesn’t give lenders an excuse to turn away qualifying business owners from applying.
“I recognize the challenges that SBA lenders face in administering the PPP program,” Magaziner wrote. “The federal government provided program guidance to lenders mere hours before the launch of the program, and there were reports that the SBA’s online portal experienced technical difficulties following the launch. But these challenges in no way compel lenders to discriminate between applicants that otherwise meet PPP eligibility standards.”
Democratic Gov. Gina Raimondo on Friday urged all small business owners struggling to stay afloat amid the coronavirus shutdowns affecting various industries to apply for the new program, saying people should get in touch with their bankers as soon as possible.
“If you are a small business and if you are struggling and need access to capital, I want you to – as quickly as you can – reach out to your banker,” Raimondo said, adding that if businesses didn’t have a banker that they should reach out to any SBA lender.
The Rhode Island SBA and Rhode Island Bankers Association did not immediately respond to requests for comment Saturday night.