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Big banks have been temporarily locked out of the small business

  • Leader
    Oct 18
    The Small Business Administration is currently only accepting loans
    from banks that have assets of $1 billion or fewer.The move may address
    concerns that small lenders that primarily work with businesses owned by
    people of color would have to compete with larger banks.Minority-owned
    banks were already concerned that businesses owned by people of color
    would miss out on loans because they were going up against big
    banks.Visit Business Insider's homepage for more stories.To get more
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      The Small Business Administration on Wednesday said it would be
    temporarily closing its Paycheck Protection Program (PPP) for small
    businesses hurt by the novel coronavirus to all but the country's
    smallest lenders, in a bid to give them fair access.The agency said it
    would only accept loans from banks with assets of $1 billion or fewer as
    of 4 p.m. EDT (20:00 GMT) on Wednesday, lasting through to
    midnight.“SBA and Treasury will evaluate whether to create a similar
    reserved time again in the future,” the SBA said.The move appeared to be
    aimed at addressing fears that very small banks, and lenders that
    predominantly serve businesses owned by people of color, would have to
    compete with big banks for the program's more than $310 billion pot of
    cash, after they exhausted a pot of money ring-fenced for them on

      There are approximately 3,862 commercial banks with assets of less
    than $1 billion, according to regulatory data as of 2019, although many
    credit unions and other small community lenders would also be small
    enough to use the new reserve window.But the decision is likely to anger
    big banks such as Wells Fargo, Bank of America, Citi, and JPMorgan,
    which are sitting on hundreds of thousands of applications from small
    businesses.The last-minute SBA change is the latest twist for the
    program, which has been beset by technology and paperwork issues, and
    subject to intense scrutiny following reports some large companies and
    hedge funds wrongfully secured loans.US bankers began another race to
    grab $310 billion in fresh small-business aid released by the SBA on
    Monday, after the program's first $349 billion in funds was exhausted in
    less than two weeks.

      Created as part of a $2.3 trillion congressional economic relief
    package, the program allows small businesses hurt by the epidemic to
    apply for government-guaranteed, forgivable loans with participating
    banks.During the second round, Congress ring-fenced $30 billion of the
    funds for banks with less than $10 billion in assets and other community
    lending groups which predominantly service minority-owned businesses,
    amid fears that the country's biggest banks would suck up the funds.With
    so much pent-up demand, that pot of cash was exhausted on Tuesday,
    requiring smaller lenders that didn't get through to compete with larger
    firms for loans.Reuters reported on Wednesday that community banking
    groups and minority-owned banks said they are worried businesses owned
    by people of color may miss out on much-needed loans as a result.