Special CARES Act SBA loans are off to a rocky start.

It was a rough start last Friday for the launch of the new 7(a) Small Business Interruption Loans program under the recently passed CARES ACT. SBA Lenders were pressed by the Treasury Secretary to move expeditiously to help small businesses and, therefore, workers via a newly enacted Paycheck Protection Program. Many lenders went live but only for existing clients. Non-bank clients were turned away and directed to the SBA’s website for further assistance.

Last minute Interim Final Rules provided by the Treasury Department offered a decent amount of clarity to lenders. However, SBA Lenders are still struggling with a complete understating of the rules and potential liabilities. On top of this, lenders are required to make rapid changes to their current systems and processes to handle the new rules and unprecedented volumes. While some loan origination requirements are being relaxed to expedite processing other requirements such as BSA, AML, CIP and FinCen reporting remain firmly intact as fraud is a major concern.

Over the past few weeks, companies like Ford and Abbott Labs have shined as they addressed the medical supply crisis. Meanwhile, companies accused of not moving fast enough felt the wrath of both the Administration, by invoking the Defense Production Act against them, and by the public.

It is now the banking industry’s turn to either rise to the occasion or face the same consequences. If banks do not implement the program quickly, then many small businesses will go bankrupt, bank balance sheets will weaken, workers will face protracted job searches and personal bankruptcies will soar. Heightened fraud detection is required as reports of financial abuse are guaranteed front page news coverage.

It may be a temporary relief to many banks that the large number of loan applications were received successfully online thus far. However, the most difficult part now kicks in to perform expedited loan processing and the release of funds to borrowers as the media presses daily on the timeline.

Sia Partners’ Banking Advisory Practice is closely following the CARES ACT impact on financial institutions. We have deep Banking Product, Operations and Technology expertise. We can rapidly deploy changes to operating models across people, processes and technology. Furthermore, our deep experience with regulatory compliance can ensure controls are in place for the inevitable future audits.

For assistance, please contact our Covid-19 Crisis Response Team at US-COVID@sia-partners.com

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