Small business owners, desperate for help amid the economic meltdown wrought by the coronavirus pandemic, are eagerly awaiting the start of a $349 billion government relief program.

But just one day before the program’s launch Friday, banks and other lenders that the government is relying on to fund loans and vet applicants were still waiting for much of the information they need to participate. They are also nervous about how they — and the government — will handle what is expected to be a huge crush of demand.

“The response is overwhelming — it’s unlike anything I’ve ever seen in my career,” said Craig Street, chief lending officer of United Midwest Savings Bank, a community bank in Columbus, Ohio. “We’re talking about attempting to do 10 times our normal monthly loan volume, and maybe more than that.”

The so-called paycheck protection program, part of the $2 trillion stimulus package enacted last week, offers companies and nonprofits with up to 500 workers a low-interest loan to cover up to two months of payroll and other expenses. Most — and in some cases, all — of the loan will be forgiven if the borrower retains its workers and doesn’t cut their wages. (The government will repay lenders for the forgiven portions of the loans.)

Q&A: How to get aid for a small business hit by coronavirus crisis

That’s an appealing deal for many companies that would otherwise be leery of taking on debt in the midst of a global crisis. Jason Dolmetsch, president of MSK Engineering & Design in Bennington, Vermont, said he was eager to apply. His engineering firm and its affiliated architectural company are trying to hold on to their 23 workers despite a rash of canceled and postponed projects.

When he called his business’s banker Monday, he was told to be patient and wait. The bank had no information yet about how the program would work.

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Late Tuesday, the Treasury Department and the Small Business Administration released an overview for borrowers and a sample loan application. The SBA, which is backing the loans, has waived most of its usual requirements — the loans do not require collateral or detailed financial records — and is encouraging lenders to take applications digitally and make quick decisions.

“This will be up and running tomorrow,” Treasury Secretary Steven Mnuchin said Thursday at a White House briefing. He added that loan checks could be disbursed “the same day” that borrowers applied.

But Thursday evening, lenders were still waiting for technical information about how to underwrite the loans — which will be break even, at best, for most lenders — and collect reimbursement on those that qualify for forgiveness. A trade group, the National Association of Government Guaranteed Lenders, had to postpone a training call for 1,500 lenders Thursday because it did not have the needed information from the SBA.

“I’ve asked for the information twice today, and I still have nothing,” Tony Wilkinson, the group’s chief executive, said Wednesday. “I worry that they’re asking lenders to make loans without the information they need to understand the rules of engagement.”

Bank lobbyist groups have warned the Treasury Department that the program as designed will not be workable, expressing alarm about their own legal liability as they try to rush money to borrowers and keep tabs on potential fraud. The Independent Community Bankers of America sent a letter to Mnuchin on Wednesday complaining that guidelines calling for low-interest loans could mean “unacceptable losses” for lenders.

SBA representatives did not respond to questions about when guidance for lenders would be available.

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Although the government has scrambled to pull aid together quickly, the program’s slow rollout has frustrated business owners facing a daily fight to salvage their companies. Paul Caragiulo is an owner of a group of restaurants in Sarasota, Florida, that employs around 150 people. He is loath to lay off anyone — even though his restaurants’ sales have cratered — but he’s also hesitant about borrowing what could be millions of dollars from a program whose details are being worked out on the fly.

The information sheets posted by the Treasury Department and the SBA have not reassured him. “Those are bullet points, not term sheets,” he said. “We’re not used to having debt, and we don’t look at that lightly.”

The Trump administration has said it wants the paycheck protection loans to be easy to obtain; a sample application posted Tuesday is a four-page form that can be completed in less than 10 minutes. But the fine print contains a line that gave Caragiulo pause: Borrowers must promise to buy only American-made equipment and products “to the extent feasible.”

Caragiulo, who uses Italian pizza ovens, said the requirement seemed like an absurd bureaucratic tripwire. When asked about it, an SBA spokeswoman pointed to a 1992 law that requires the agency to “encourage” business owners receiving financial help to buy American goods. She did not respond to questions about how — or if — that will be enforced.

Other federal small business aid efforts have been generous but chaotic. A program offering low-interest disaster loans funded directly by the government has already had more than 100,000 applicants, according to one person familiar with its operations.

The SBA started taking applications weeks ago, but last Friday’s stimulus bill added a new sweetener: Applicants, including those who are rejected for loans, are eligible for up to $10,000 in cash grants. (The funds are described on the SBA website as a “loan advance,” but an agency spokeswoman confirmed that it does not have to be repaid.)

Abninder “Binny” Mundra at the UPS store he owns with his wife in Portola Valley, Calif., Wednesday. In the wake of the coronavirus epidemic, he applied for a disaster loan on March 20 and was approved four days later for $210,000. (Jim Wilson / The New York Times)
Abninder “Binny” Mundra at the UPS store he owns with his wife in Portola Valley, Calif., Wednesday. In the wake of the coronavirus epidemic, he applied for a disaster loan on March 20 and was approved four days later for $210,000. (Jim Wilson / The New York Times)

Abninder Mundra, who owns a franchise of the UPS Store in Portola Valley, California, applied for a disaster loan March 20 and was approved four days later for $210,000. Then the stimulus bill introduced the grants. Mundra said an SBA representative had told him to fill out a second loan application if he wanted the grant funds. He was still waiting for both his disaster loan check and a response to the grant application.

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Mundra said he could afford to wait a few weeks and was grateful for the aid. He also plans to seek a paycheck protection loan as soon as his bank starts taking applications. He had to cut his three employees’ hours to offset a drop in foot traffic and hopes the loan will help restore them.

“I think the government really understood that small businesses are the backbone of the economy,” he said. “If we stop employing people, they won’t have money to pay their bills.”

But with job losses already setting records and certain to worsen, lenders fear that the $349 billion Congress allocated for the paycheck program will quickly run out. Senior officials from the Treasury and SBA told reporters Tuesday that they were prepared to ask Congress for more money if needed.

The Gator Club in Sarasota, Fla., is one of many local businesses closed due to the coronavirus. The government has promised to lend $349 billion to small businesses starting Friday, but banks and owners have no idea how it will play out. (Zack Wittman / The New York Times)
The Gator Club in Sarasota, Fla., is one of many local businesses closed due to the coronavirus. The government has promised to lend $349 billion to small businesses starting Friday, but banks and owners have no idea how it will play out. (Zack Wittman / The New York Times)

Jim Donnelly, chief commercial officer of Bangor Savings Bank in Maine, said his small staff was working around the clock to accommodate the pent-up demand. In a typical year, his bank handles hundreds of business loans. He expects to process thousands in the coming months.

And even though his bank was still waiting for critical technical information, it planned to start taking loan applications Friday.

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“We have local businesses like restaurants that have shut down and are looking at these loans as a way to reopen their doors,” he said.

Many of the nation’s largest banks said they planned to offer the loans, though some will restrict which applicants they will work with.

JPMorgan Chase, for example, said it would make the loans available to customers with Chase business checking accounts as of Feb. 15. Bank of America and Citi both said they planned to participate but did not yet have details.

The Treasury has encouraged nonbank lenders to also offer the loans, but some that want to do so say the process has been maddening. Kabbage, one of the biggest online lenders, said the system for becoming an approved lender was opaque.

Street, at United Midwest Savings Bank, was also desperate for more information, including details about how thoroughly banks are expected to scrutinize potential borrowers. Any choice involves trade-offs: Quick approvals and cash disbursements raise the risk of mistakes and borrower fraud, but rigorous underwriting takes time that desperate business owners and overtaxed bankers don’t have to spare.

Street hopes the SBA and the banking industry’s regulators will give lenders leeway to err on the side of speed.

“We’re trying to set things up so that we can crank these things out,” he said. “We had calls starting Monday morning from people who wanted to borrow right away. It was hard telling people they had to wait. Nobody can afford to wait.”