Austin (KXAN) — As businesses impacted by the economic fallout of COVID-19 look for financial relief from the federal government, banks around the country have been busy processing those applications.

On Friday, the U.S. Small Business Administration announced that small businesses could apply for the Paycheck Protection Program, which works through banks and lending institutions across the country to keep small businesses afloat.

Monday, the Cedar Park Chamber of Commerce and Williamson County hosted a virtual question and answer session with a local bank about how those loans work. The star speaker on the call was Mike Litton, the Executive Vice President and Director of SBA lending for R Bank. Litton described the work processing these applications as “a Herculean effort.”

“We appreciate everybody’s patience,” Litton said.

“Unprecedented Times”

While R Bank has administered SBA 7(a) loans before, Litton explained that what is new this time is that banks are administering disaster loans for the SBA.

“These are unprecedented times,” Litton told the virtual chat. “In the history of the SBA which was created in 1953, we are doing things [now] that we’ve never done before.”

“Right now, banks have been tasked with pushing out $349 billion dollars in the payroll payment protection program,” he explained. The funding for the PPP came from the recently-signed-into-law CARES Act. Litton said that the PPP program was created in a matter of weeks.

“Historically, the SBA has been a direct lender during disasters, they have a disaster loan office and generally those disasters have been regional in scope such as a hurricane, flooding, wildfires or whatever,” he said.

Litton continued, “so the SBA in conjunction with the Department of Treasury made a determination that there was no way that they had the bandwidth to push this program out so they enlisted banks’ help.”

He explained that his bank got final direction from the SBA late Friday afternoon and got to work processing these applications Friday night. Some applications can take fifteen minutes to process, others can take an hour, Litton said. He estimates he has been working fifteen hours a day along with an SBA coordinator to input these applications.

“The system is really clunky, it wasn’t meant to do this. I’m surprised, really, that it hasn’t crashed” Litton laughed. “And now that I’ve said it probably will, so I hope I didn’t jinx it.”

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Litton said that R Bank has received so many applications that they decided to only offer the PPP program to existing customers at this time.

“We don’t know how long it’s going to take to push this money out,” Litton said. “I’ve been hearing various reports. Quite frankly, I’d be surprised if it lasts through the end of the week.”

President Donald Trump Tweeted on Saturday that if the funds for the PPP loans run out, he will ask Congress for more money to give relief to businesses.


Litton explained that there are two main types of disaster loans available right now from the SBA, Economic Injury Disaster Loan Program and Paycheck Protection Program (PPP). The PPP offers a loan to help small businesses keep their employees on the payroll.

Litton calls the PPP a “largely forgivable loan” as long as you use the money for payroll to retain employees or to re-hire laid-off employees. The loan provides for eight weeks for payroll, and a portion of the loan could be used for things like rents, utilities, or interest payments on a mortgage, Litton said.

He explained that generally, nonprofits, faith based organizations, veterans organizations, tribal businesses, or other businesses of less than 500 employees are elligible to apply for PPP.

“It provides a loan amount of two and a half times the average monthly payroll, and that’s averaged over the last twelve months,” Litton explained. “That can include payroll taxes and it can include benefits.”

He noted PPP loan relief does not include 1099 employees — independent contractors. However, Litton said 1099 employees can apply directly to the program on their own if they to.

For the PPP application process, Litton recommends providing statements for the past twelve months with details for each employee. He added that if anyone on the payroll is earning more than $100,000, the amount above $100,000 is excluded from the average calculation.

Litton said the PPP loan does not have collateral or personal guarantees, but if it is discovered the loan has been used for unauthorized purposes, that trigger automatic recourse which could constitute fraud on a federally guaranteed loan (which is a felony.)

He told the video chat group that the PPP loans will be deferred for six months and then possibly up to twelve months.

“So the forgivable portion, the portion that is used for payroll could conceivably be forgiven within eight weeks after dispersal,” Litton said.


Economic Injury Disaster Loan (EIDL) Program is available directly from the SBA and can offer economic assistance of up to $10,000. It is not a forgivable loan, Litton said. The loan can be used for any business purpose, has a term of 30 years, and a rate of 3.75%, he noted.

Businesses can apply for that loan themselves online.

The last Litton heard, there has been a lot of demand for these loans and it was taking the SBA around four weeks to process applications for these loans.

Litton said that you can apply for the PPP through a bank and still apply for EIDL. The funds just can’t be used for the same purpose.

Other types of assistance

Litton recommends that if the SBA loan options don’t work for your business, that you sit down with your bank and explain your situation.

“What we’re doing is sitting down with those folks and working out a plan to help them through this time,” Litton said. “You know it’s always our goal to help them become successful and get through the rough patches.”

San Antonio-based Frost Bank offered similar recommendations.

Frost Bank’s Corporate Communications Manager Bill Day advised that people, “should talk to their banker, whether it’s Frost or whichever bank they should work with. Even beyond the Paycheck Protection Program, there are things banks can do to help them out.”

Day said that Frost has worked with customers during this time to defer loan payments if needed or modify those loan payments if necessary.

Like other banks, Frost employees have faced a significant workload since the PPP program went online Friday. Day explained that Friday, Saturday, Sunday and Monday, Frost received more than 7,000 applications, several times the amount they would receive in an average month.

Of those applications, Day said that a few hundred have already been submitted to the SBA and approved.

“We will eventually get through these, we are making progress,” he said, noting that it will likely be several days before applicants hear back on whether their loans are approved.

Day explained that in some cases, Frost staff are literally working around the clock to process these applications in the case of telephone customer service.

Like R Bank, Frost is also only offering PPP to existing customers.

Frost Bank, he noted has existed since 1868 and lasted through the Great Depression, two world wars, and multiple financial crises. Even still, Day said, the demand that is happening now is unprecedented.

“We actually have and have implemented contingency plans for helping customers during a pandemic,” Day said. “We were able to put some of those things into place [now], we’ve never really had to do that in real life before.”

“We realize how important this is to our customers and how much we need this,” he said of these SBA loans.

Sunday Wells Fargo announced it had reached its cap of 10 billion dollars to lend under PPP and that the company will be focusing its efforts on nonprofits and businesses with 50 or fewer people.