Michigan business owners frustrated with Comerica’s SBA loan handling
As the federal government prepares a second round of funding to support the payroll of small businesses, some business owners in southeast Michigan are hoping their banks are better prepared to come to their aid this time around.
Many local business owners contacted The Detroit News and described their banks’ failures to process loans through the US Small Business Administration’s Paycheck Protection Program. In some cases, they said, their banks didn’t even agree to their demands before an initial $ 349 billion loan pool dried up last week.
Several reported problems with one bank in particular: Comerica Bank, which ranks among the largest in Michigan, in terms of deposits and number of branches. Comerica was once the largest in the state and was headquartered in Detroit until 2007, when it made the surprise announcement that it was moving to Dallas.
Among Comerica’s frustrated clients is Priscilla McPherson, Billing Administrator and Maternal and Child Health Coordinator for Detroit-based Crystal Home Health Care. McPherson said she did not understand how the company could have missed funding for the program designed to help small businesses weather the coronavirus pandemic.
“We are the first responders. We are not asking for millions of dollars. We are asking for $ 300,000 to be able to survive,” McPherson said. “I don’t see how we have been 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 it confident that a second round of funding Congress could approve this week.
Comerica did not set up an online application portal until Monday, according to emails sent to clients, days after the SBA announced that the program had committed all of its funding. As Congress and the White House finalize an expansion of the program, local Comerica clients want results this time around.
“I want Comerica to heal us,” McPherson said, highlighting Crystal Home Health Care’s 36-year relationship with the bank. “I want Comerica to say, ‘When that next round comes up, you will be really honestly considered for the loan. “”
In response to a request for comment, a spokesperson for Comerica provided an email update on the program. The bank now has a “two-track approach”, processing loans through its “traditional underwriting channels” while sending the rest through its new automated system.
The bank says it has 1,000 employees working on the program and, as of Monday, had received more than 5,000 applications and approved $ 1.8 billion in loans. This number of requests, however, would not reflect customers who say they were unable to submit a request.
The News asked Comerica how many requests it had processed and the total dollar value of loan requests it received, but the bank did not provide this information.
Comerica is now queuing applications in anticipation of a new round of funding.
Small business loans were part of the $ 2 trillion coronavirus, aid, relief and economic security law, enacted on March 27. It offered low-interest loans of up to $ 10 million to businesses with 500 or fewer employees. Loans are repayable if borrowers keep their employees at work for at least eight weeks.
The program launched on April 3 and quickly ran into problems. With the SBA issuing initial guidelines hours earlier and some questions about the program remaining unanswered, several major banks were not ready to start accepting applications until the following week. Others, including Bank of America, immediately hit the road and were hit by a flood of applications from desperate business owners.
The loans are guaranteed by the government. The lenders, through whom the loan dollars circulate, are reimbursed by the SBA.
The goal of the SBA was to quickly obtain financing for businesses. In 14 days, the program provided assistance to some 1.6 million small businesses, according to the SBA and US Treasury Secretary Steven Mnuchin. During this period, the agency processed more money than it had received in the previous 14 years. In Michigan, it has approved more than 43,000 claims totaling nearly $ 10.4 billion, according to the SBA.
While he said he couldn’t comment on any particular lender, Robert Scott, the SBA’s regional administrator in the Great Lakes region, said on a call Friday: “If a big bank has never granted SBA loan before, I could see how she would be a little shy. “
However, he said, some typical SBA rules have been relaxed and many non-traditional banks and lenders have been able to jump into the program.
But while many lenders have struggled, some Comerica clients say the bank’s management of the program has been blatant.
“There have been hiccups everywhere, but nothing like Comerica Bank,” said Charles Green, a Novi-based certified public accountant who tried to apply for a loan through Comerica himself, and also tried. help multiple clients apply.
Several Comerica clients, some of whom declined to speak officially because they feared it would negatively affect pending requests, have contacted The News about their experiences. They described scenarios in which they contacted Comerica and were repeatedly assured that the bank would soon have an online application platform. When this did not materialize, the bank began to process the requests manually. But even then, some clients say they were unable to submit applications.
After two weeks of back and forth, Comerica informed Green on April 15 that he was on a waiting list for a manual application. On Monday, he decided to apply for one of the loans through PayPal, in which the SBA has authorized participation and is accepting applications in case the program is reassigned; the process was completed in an hour. Green refused to disclose the value of the loan he applied for.
McPherson of Crystal Home Health Care said Comerica told her repeatedly that she would be able to process her request: “Comerica Bank tied me up all the time.”
Without help, she doesn’t think her agency will survive another month.
She said the company, which employs 54 people and has an annual payroll of around $ 1 million, is struggling to get reimbursements from Medicare and insurance companies. Combined with a difficulty in obtaining personal protective equipment, she has difficulty meeting the demand for her services. An advance from Medicare was not sufficient.
All of this is happening even as employees have fallen ill after treating COVID-19 patients. McPherson said she had recently recovered from the virus and CEO Bob McPherson is still recovering from a serious fight. In total, the company has had seven confirmed cases.
During this time, she followed reports of large companies such as Shake Shack and Ruth’s Chris Steak House receiving the loans, which drew criticism. (Shake Shack said Monday he was returning the money.) Bloomberg News reported that more than a dozen publicly traded companies with revenues of over $ 100 million received loans under the from the program.
The SBA and the Treasury Department said nearly three-quarters of loans were under $ 150,000, “demonstrating the accessibility of this program even to the smallest of small businesses.” Still, only 2% of applicants got 30% of the funding, according to SBA data.
And, some lenders have faced allegations that they are prioritizing larger loan amounts over processing applications on a first-come, first-served basis. Many banks including JPMorgan Chase, Bank of America and Wells Fargo face legal action for such alleged practices, Politico reported On Monday.
The White House and Congressional leaders on Tuesday reached a deal to provide $ 310 billion in new funding for the paycheck protection program, as part of a larger $ 484 billion relief plan that could to be enacted this week. The package also adds $ 60 billion to a separate program of emergency loans and grants for small businesses. Responding to demands from Congressional Democrats, it is providing $ 75 billion to hospitals and $ 25 billion for a new coronavirus testing program.
Of the new Paycheck Protection Program allocation, $ 60 billion is earmarked for small and medium-sized financial institutions. The legislation also requires the participation of lenders, such as community financial development institutions, who lend to underserved communities.
Borrowers and lenders hope that the second round will go more smoothly. Among them is Alexander Cohen, CEO of non-bank lender Liberty SBF, who handled the requests.
“Hopefully with a few fixes,” he said, “we’ll see a more even distribution in the next round.”