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Alabama small businesses denied federal relief funds on first day of program

What began as a day offering a sliver of promise for small businesses across Alabama ended with disappointment.

An unidentified glitch in the U.S. Treasury Department’s electronic transfer software, known as ETRANS, prevented the submission of most of the state’s small business loan applications.

The loans are part of the federal government’s effort to provide relief to the small business sector. Included in the CARES Act, the nation’s $2.2 trillion economic stimulus package, is a $350 billion Paycheck Protection Program administered by the Small Business Administration (SBA).

The money is set to be distributed by banks in the form of loans. Yesterday was the first day applications could be submitted, with funding expected to be nearly immediate.

However, reports of ETRANS being down began popping up across the state. This malfunction prevented banks from extending the Paycheck Protection Program loans.

With the Gov. Kay Ivey issuing a statewide stay-at-home order Friday, the hardship facing the small business sector continues to grow.

“We are hearing from far too many small businesses, today, that they are being shut out of the Paycheck Protection Program forgivable loan program. Small businesses make up half of our economy and employ nearly half of all workers, but this has the potential to be the last straw for many small businesses and their employees,” said Brad Close, president of the National Federation of Independent Business in a statement from the organization.

The results of a survey published earlier in the week by NFIB showed that 92% of small employers said they are negatively impacted by the coronavirus pandemic, up from 76% saying the same just 10 days prior.

The survey also conveyed concern as to how long can small businesses can continue to operate under current conditions.

“NFIB research out this week indicates that half of all small businesses cannot last more than one to two months under current conditions,” Close noted. “Every day without access to the PPPL program means more lost jobs and more shuttered businesses. America’s small businesses are facing an economic crisis that is not of their making. These small businesses did their due diligence and were ready this morning, but are hearing ‘no.’ The current delays are unacceptable and hurt those that need the help most – very small businesses that find themselves in the worst of financial circumstances.”

The banking industry began to express unease with the process set out by SBA as late as Thursday.

“Banks across the nation are literally waiting for instructions from the government on how to move forward,” outlined Scott Latham, president and CEO of the Alabama Bankers Association. “While we are grateful for the help, we are frustrated that those needing help the most are forced to suffer while the rules are still being written. Banks across Alabama have a strong reputation of helping individuals and small businesses during good times as well as the challenging times, and this difficult period will be no exception. Until the rules are final, we are simply in a waiting game that is out of our control.”

RELATED: Banks seek final instructions from feds on small business stimulus loans

An effort to press for clarified instructions came from the industry’s fear that the process will become a chaotic scramble, according to a report Thursday in Politico.

Those fears proved to be grounded in reality once the program went live.

Close urged everyone involved to find a way to get much-needed capital into the hands of small businesses.

“Banks and other financial institutions need to do everything in their power to get these loans out the door to Main Street businesses now, whether or not the small business is an existing customer or a new customer,” he stated. “And our government agencies have to ensure that all banks and financial institutions have the guidance they need to make these loans immediately. We urge banks and government agencies to get this problem solved immediately, so they can stem the tide turning against small businesses and their employees.”

SBA had yet to respond to a request for comment.

Tim Howe is an owner of Yellowhammer Multimedia

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