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‘Deeply frustrated’: Tech issues and backlogs hit the SBA’s second round of PPP loans

April 27, 2020, 6:33 PM UTC

Round 2 of the Paycheck Protection Program kicked off Monday morning, and the Small Business Administration’s systems are already experiencing problems amid a flood of backlogged applications.

The SBA’s processing site, E-Tran, reportedly experienced problems shortly after it opened back up at around 10:30 a.m. ET on Monday, although it’s unclear if the issues were widespread. Round 1 of the SBA’s program ran out of money in just 13 days when funds dried up on April 16. During Round 1 of the PPP, the E-Tran system reportedly had intermittent problems as well, going down for periods of time, banks recalled, while SBA denied the system had an outage. However, the Small Business Administration told Fortune in a comment that the “SBA notified lenders yesterday that pacing of applications into the E-Tran system would occur, meaning all lenders would be able to submit at the same rate per hour. The pacing mechanism prevents any one lender from submitting thousands of loans an hour into the E-Tran system.  If a lender goes above the pacing limit they will get timed out.”

Replenished with a new $310 billion, many banks are saying the new funds will initially go directly to a hoard of backlogged applications from the first round that were unable to get funded or processed in time—leaving some to wonder if funds for this tranche will be depleted in a matter of days.

For one, Seattle-based Washington Federal bank has a backlog of nearly 1,500 applications in their system’s queue, which they will be processing “in waves,” plus an additional 2,000 applications in the bank’s waitlist. “Whether that’s 500 people or 1,000 every 10 hours, we’ll see how it goes,” Washington Federal’s CEO Brent Beardall recently told Fortune. Minnesota-based regional bank Sunrise Banks also recently told Fortune it had around 3,000 applications in its queue for round 2.

Others like fintech Square, which began approving applications in round one after obtaining SBA approval for the program, told Fortune on Monday morning that it was getting some loans through once E-Tran opened back up. Jackie Reses, head of Square Capital, told Fortune that over the weekend, the SBA set up a means to pace banks so the system wasn’t flooded at the onset (“I’m so anxious [but] our loans are getting through, so I feel so much better,” she says).

Still, lenders report that the E-Tran system was experiencing issues out of the gate amid a deluge of applications.

“We have had trouble with E-Tran this morning,” Sunrise Banks’ CEO David Reiling told Fortune in a note on Monday morning. “It has been a disappointing start to round two of the PPP authorization process. We hope the SBA can fix it soon. We currently have approximately 600 applications ready for E-Tran now and that number is targeted to be over a 1,000 shortly.”

Rob Nichols, the president and CEO of bank trade group American Bankers Association, said in a tweet Monday that banks were “deeply frustrated” with the E-Tran system on Monday morning.

Washington Federal’s Beardall told Fortune in a note Monday that amid a “tsunami” of applications, the SBA’s infrastructure “appears to be over-whelmed.” But he doesn’t blame the SBA, who he credits with “working very hard.” Others like Frank Sorrentino, the chairman and CEO of New York and New Jersey-based regional bank ConnectOne Bank, note his bank hasn’t experienced any big outages or issues, but “it has been a slow process. It’s my view that it’s just slow for the individual institutions, but not for the entire SBA process as a whole,” he tells Fortune.

Of note, the Small Business Administration said Monday that over $2 billion in PPP loans that went to companies during the first round of funding was either declined or returned, and will be put back into the pot for round two.

Sen. Marco Rubio said in a video on his Twitter Monday that so far, the average loan size is about 50% less than in round one, based on applications from Monday morning.

Despite long queues at many banks, big and small, some lenders still suggest applying for the PPP, even if it’s for the first time during round 2. “If [you are] a small business, you get in line—pick your bank and get in line and start working through it,” Beardall suggested.

Many lenders anticipate a round 3 will be necessary to deal with the demand for the program. Republic Bank’s chairman Vernon Hill recently remarked to Fortune, “Are they all going to get funded? I don’t know.”

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Update, April 27: This article has been updated with additional comments from bank CEOs about the E-Tran system.

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