With only one week from the creation of a $349 billion small business loan program to its roll out, banks reported working late nights and weekends to prepare for and begin processing loans meant to help small businesses experiencing financial difficulties due to the coronavirus pandemic.

From the outset of the program less than two weeks ago, lenders have received an overwhelming number of applications, leaving the Paycheck Protection Program near the end of its funding.

“[Small business owners] want to make sure they get approved before the money runs out,” said Martin Morgado, president and CEO of the Savings Bank of Danbury. “That’s a big concern, and that’s why I think we had that rush right at the beginning – everybody wanted to get in, and nobody knew how long the money was going to last.”

Program Hit Turbulence

The U.S. Small Business Administration has already received over 1 million PPP applications nationwide for $250 billion, according to the SBA, more than two-thirds of the funding allocated to the program, which was supposed to last until June 30. Connecticut lenders have issued 11,930 PPP loans for $2.9 billion.

Created as part of the $2.2 trillion CARES Act passed on March 27, the U.S. Small Business Administration Paycheck Protection Program is meant to encourage small businesses to keep employees on payroll at a time when non-essential businesses in Connecticut and across the U.S. have closed. If employees remain on payroll or are hired back, all or portions of the loan could be forgiven.

When the program went live on April 3, guidelines had just been released the prior evening, with some differing from what the SBA and Treasury Department had communicated earlier in the week.

Not all lenders had their systems ready to start accepting applications that Friday. Others processed applications manually, but by Monday, April 6, the SBA system was experiencing significant problems.

Lenders also waited for SBA guidance on several issues during the first week, including what documents were required to verify the loan amount and the loan repayment terms, delaying funding to small businesses.

Lenders Leverage Tech

More than 5,000 lenders nationwide are participating in the program, though not all banks and credit unions accept applications. Some have partnered with financial technology companies, including Guilford Savings Bank, which partnered with Lendio, and East Hartford-based American Eagle Financial Credit Union, which recently began working with alternative lender Kabbage.

While the PPP roll-out had rough patches, several banks were able to leverage existing technology and SBA lending expertise.

Among them was Waterbury-based Webster Bank, New England’s top lender in the SBA’s 7(a) loan program. After the guidelines were released Thursday evening, Webster Bank was ready around 5 p.m. Friday to begin processing loan applications, using a platform that the bank normally use for loans less than $250,000.

“The longer it goes on, the more clarity we have,” said John Guy, Webster’s head of business banking. “But that’s exemplary of the whole process when you try to do something in a short period of time, and you have an overwhelming response – and that’s probably been the biggest surprise, how overwhelming the response has been is such a short period of time.”

Along with the bank’s five-person SBA team, staff from across the organization played a role in getting the program launched and the applications processed, Guy said. Some employees have worked directly with small business owners to answer questions, and others who normally work on mortgages have helped with the processing. The technology team has been critical as well, Guy said.

‘Its Saving Jobs’

The Savings Bank of Danbury also leveraged its existing lending platform to process PPP loans for small businesses and, starting April 10, independent contractors.

The bank is also supporting another group of employers. Morgado emailed nonprofits in the region to let them know they could apply for PPP loans, and the bank dedicated three employees to work with these organizations, including helping with the application process.

“A lot of nonprofits are not able to hold their fundraisers because everything has just stopped,” Morgado said. “That’s money that they’re probably not going to get back, so this helps.”

Because of uncertainties surrounding SBA guidelines, the Savings Bank of Danbury did not fund any loans during the first week. One of the outstanding questions involved the loan note, and after the SBA said lenders could use the agency’s or their own, Morgado said the Connecticut Bankers Association created one for its members.

Once the note was finalized, the bank started funding loans this week. Morgado said small businesses should remain patient during the process.

“We look at this as something we’re doing to keep the economy going,” Margado said. “It’s saving jobs and providing jobs through getting this money out there – that’s why we’re working so hard to get it out there as quickly as possible.”

Treasury Secretary Steven Mnuchin is working with lawmakers to get additional funding for the program.