While community banks were the first to offer a lifeline to local businesses through a $349 billion program set up by the U.S. Small Business Association, national banks have begun to process the loans that are designed to give owners the money to keep paying their employees.

The slower rollout by large banks, such as Bank of America, Wells Fargo and JP Morgan Chase, prompted an SBA official to lash out at the national banks that received billions in bailout money in 2008.

Joseph Amato, SBA Nevada district director, was recorded criticizing the large banks, saying that while they were happy to accept government bailout money 12 years ago, they have not made themselves available to help small-business owners affected by the coronavirus pandemic, according to the Washington Post.

“We are trying to work quickly with national non-bank lenders and other sources that may make up the difference for the companies like, sadly, BofA, Wells Fargo and Chase that haven’t really stepped up to the plate to take on all the small businesses they can,” Amato said this week.

Greg Deckard, president and CEO of Spokane Valley-based State Bank Northwest, said that 60 percent of small-business loans are handled by small lenders, which can react quicker and know their clients better than the big bank chains.

“People are calling me right and left saying they can’t get through to their bank, and we are taking care of them,” Deckard said. “There is a place in our country for the big banks, but right now we can be more flexible and nimble.

“Now is the time for people to understand why they should bank with a community bank who knows them by name and they are not just an account number.”

A national spokeswoman for Bank of America, Carla Molina, agreed with Deckard that smaller banks have some advantages in scale. But Molina noted the rules governing the Paycheck Protection Program have repeatedly changed and that federal regulators suggested that lenders work with the people they already know.

Molina, speaking from Austin, Texas, confirmed Wednesday that Bank of America is only taking SBA applications from existing clients. The chain began taking applications Friday.

“We are doing everything we can to help small-business customers. We have 3 million small-business clients,” she said. “As of close of business (Tuesday), we have accepted 250,000 applications worth $40 billion in loans.”

The criticism that Amato levied at the national banks has not been echoed in Washington state, said Glen Simecek, president and CEO of the Washington Bankers Association.

“We have had nothing but good relations with the SBA office here,” Simecek said. The criticism from Amato “was a big shock to us.”

Simecek and association spokeswoman Megan Managan said they spoke Wednesday with representatives from Chase, Bank of America and Wells Fargo.

“They said they are doing the best they can,” Simecek said. “Small lenders can react quicker. By the same token, the big banks have the benefit of scale. There is certainly room for both players in helping small business get the funding.”

Managan said the continually changing guidelines and speed with which the program came about has caused some of the delays.

Simecek said he did not agree with Amato’s characterization of how the big banks have performed.

“The demand has been overwhelming, which speaks to the depth of the crisis,” he said. “I don’t care if you are Wheatland Bank in Spokane or Wells Fargo, you are doing the best to deliver to your customers.”

Program constraints

As banks continue to meet a crush of business owners seeking help through the program, some of the rules may make it difficult for business owners to comply, Simecek said.

Under the current guidelines, business owners must use more than 75% of the SBA money to retain or rehire workers. If all rules are followed, the business owners would not have to pay the money back.

However, current SBA rules state the money must be spent in eight weeks. But what happens if the stay-at-home order continues past two months?

“I have heard concerns about that both from Washington state and from my peers in other states,” Simecek said. “Whether you are a restaurant or a coffee shop or a hotel, the employees may be better served by state unemployment insurance. The question is, would they be better served to stay at home?”

Deckard, who serves as treasurer for the 3,500 member Independent Community Bankers of America, said he shared the same concerns about the eight-week rule.

“This is creating a lot of angst,” he said. “What are you going to do after those eight weeks and you are still closed and you can’t service your customers?”

Banking officials are currently lobbying SBA officials to change that rule, he said. Otherwise, business owners who can’t abide by the eight-week payout rule may have to pay the money back as a loan over two years.

“The key is you have to abide by the guidelines,” Deckard said. “But eight weeks doesn’t meet every small business’s timing needs.”