Online lenders cut access to funds for small businesses

The credit squeeze presents a huge problem for countless small businesses that have gone out of business due to social distancing and are not generating revenue. Many have furloughed workers, but still plan to pay outstanding bills. But now they can no longer withdraw money from trade lines of credit.

When it comes to loans in emergency situations, it’s more appropriate for the federal government to provide those funds, Frohwein said.

“The funds allocated in the CARES Act were specifically designed to be the best and most appropriate funding for small businesses to support their businesses and employees,” he said.

Paycheck Protection Program loans are federally guaranteed and will be forgiven if borrowers can prove they used the proceeds to pay employees, health care benefits, rent, or other uses specific. Private lenders cannot afford the risk of providing business loans in an emergency situation, many of which will not survive the economic downturn.

Banks and online lenders will nevertheless be involved in the Federal Paycheck Protection Program, likely as distributors of the loaned money, although details are still being worked out. Kabbage plans to join the program as soon as it’s ready, Frohwein said.

Other local banks have also said they will participate. Synovus, which operates 44 branches in the Atlanta metro area, wants to be involved, spokesman Lee Underwood said.

Atlanta-based Delta Community Credit Union is waiting for the Small Business Administration to clarify reporting requirements for lenders, “so we can determine whether we are able to deliver the program in a way that benefits our members. “said Loans Office Chief Bob Walsh. in an emailed statement.

Other lenders, however, say business is continuing as usual, despite the coronavirus shutdown. Georgia’s smaller banks haven’t stifled access to credit for small businesses, said John McNair, CEO of the Community Bankers Association of Georgia.

“I don’t see any desire from our banks to slow lending,” McNair said.

Truist has made credit available to borrowers affected by the COVID-19 crisis through several new programs, such as deferred loan repayments and fee waivers, spokesperson Mike McCoy said. Truist also plans to participate in the Paycheck Protection Program and the bank has asked 17,000 customers for updates on how they can apply for the loans.

The credit issues faced by small businesses don’t seem to apply to many large publicly traded companies in Georgia. Home Depot, Macy’s, NCR and others withdrew billions of dollars in cash to survive economic uncertainty.

Some have completely maxed out their lines of credit. In the latest example, Atlanta-based medical products supplier Cryolife last week withdrew $30 million in cash from a revolving credit facility, the full amount available. The silver is needed to “maintain maximum financial flexibility during the current uncertainty in global markets resulting from the COVID-19 pandemic,” Cryolife said in a statement.

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