Banks on the Front Lines with CARES Act: EIDL & PPP

April 8, 2020

These are unprecedented times.  Many small businesses are desperate for capital now but are having to wait on the lines as questions are asked/answered and approval is granted.

The $2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act that was signed into law by the President on Friday, March 27 was a welcome relief for many, offering two major loan vehicles to small businesses in crisis due to the COVID-19 pandemic.  Although much needed, the sheer volume of organizations in need of support means the floodgates of demand have been opened, and the systems for processing that demand have been put on notice. The question now is, how will those systems cope with the influx of applications for support and will banks maintain and build on the trust and loyalty of these customers they worked so hard to build.

The CARES ACT 

The CARES Act sets aside roughly $10 billion for disaster loans and $350 billion for paycheck protection loans to help small businesses impacted by the global pandemic. 

  • Economic Injury Disaster Loans (EIDL) offer disaster assistance of up to $2 million to replace short-term lost revenue, with interest rates of 3.75% for small businesses and 2.75% for nonprofits. Small businesses are eligible for a $10,000 advance. 
  • The Paycheck Protection Program (PPP) offers loans of up to $10 million at an interest rate of 1% through SBA-approved lenders.  Designed to be used to keep employees on the payroll, the loans are forgiven if certain requirements are met.  

The Small Business Association (SBA) has largely redressed the technical glitches that crippled its website and call center last week, thanks in part to extraordinary help from both the public and private sectors. It is now the banks that are on the front line of small business relief, scrambling to help navigate the CARES Act, put the processes in place to administer the necessary support, and scaling their existing systems and infrastructure. Naturally, small businesses have questions, questions about the Act itself, questions about how it relates to their business, questions about what to do next, and they’re flooding call queues and hammering websites and mobile apps searching for the answers.   

The fact is that the small business banking industry is just not prepared to manage this tsunami of applications and requests.  The first wave of EIDL loans began to hit the banks this week and overwhelmed many of the smaller regional players. The PPP application wave started on Friday, and the banks are already getting crushed. This is a critical moment for both the banks and their small business customers, as businesses are racing to try to get help before they run out of cash and banks are racing to help equally as frantically. The customer experience that these banks (large and small) pride themselves on and are fiercely fighting to protect is at risk. A quick look at Twitter shows the magnitude of the problem:   

Tweet from small business dealing with PPP loan application issue during COVID-19 pandemic, SBA, Wells Fargo and Bank of America
Tweet from small business dealing with PPP loan application issue during COVID-19 pandemic, SBA
Tweet from small business dealing with PPP application issue during COVID-19 pandemic and SBA
Tweet from small business dealing with CARES Act application issue during COVID-19 pandemic, SBA and BoA

The Size of the Problem 

In an up year the SBA is known to handle between 800 and 1M loan applications from small businesses.  While no one can predict what this year will be like in terms of applications, it is safe to assume that the number will be deep into the millions.  There are between 20 and 30 million small businesses currently out there, and it is fair to say most will need help, if not straight away, then at some point in the future given the protracted nature of this pandemic. 

The Underlying Challenge 

Scaling the infrastructure to handle the loan volume is only one of the challenges that banks on the front lines are facing.  As well as the pressure internally to handle the increased volume of applications, their customers have an almost never-ending list of questions that their call centers and technologies are just not geared to answer.  The increased external pressure is also a huge part of the scaling conundrum.  

  • Has my EIDL loan been approved yet? 
  • If someone submitted an EIDL application during the last couple of weeks prior to passage of the CARES Act, can they still get the advance?  
  • How do they go about getting it since it was not part of the application? 
  • Are there rules for how a business has to use the advance? 
  • Why does the EIDL 3.75% interest rate when the Federal Reserve rate is almost zero? (FYI it is because the EIDL rate is set at the beginning of the quarter. In January the rate was 3.75%) 
  • What is the PPP calculation and how fast can small businesses expect to see PPP relief? 
  • Does a business need to maintain or grow their number of employees to have the PPP loan forgiven? 
  • Can a business participate in both EIDL and PPP? 

These are challenging questions that increase both handling time in call centers and frustration in the call handlers who are faced with customers who are naturally anxious about their future and want to know the answers right here, right now. 

CX is the Axis Point

Customer experience is paramount for banks, and never more so than in times of upheaval and uncertainty.  Handle this in the wrong way and banks will see customers churn the minute this panic subsides. Handle it well, and you can build trust and deeper loyalty in your customer base, as they acknowledge you being there for them in an extreme moment of vulnerability.  

The challenge is enormous, and the outcome is far-reaching.

Banking infrastructure must be scaled and resources mustered to meet the demand at a time when resources are cripplingly distributed. Difficult enough, and even more so now when lending governance and oversight is also weakened with the new distributed workforce. Existing operational control systems in every area from loan processing and underwriting to privacy and fraud must all adapt and prepare a response plan to meet the unprecedented scale of this demand.  Frustrated customers are holding on the line, but small business lenders are on the front lines trying to defend the reputations they invested so much in to build.  


This isn’t a “big bank” problem by any means.  This is a loyalty problem. It hits banks small and large, regional and national, it doesn’t discriminate.  The banks that emerge victoriously are the ones who invest in scaling their systems and capability to respond to anyone who is out there on the line seeking answers.

How are you scaling your organization to meet new customer needs? Is the CARES Act creating a surge of customer engagement? Let’s talk, sign up to hear more or drop a comment below.

Stay up to date with our outlook and guidance through the COVID-19 pandemic by visiting our Market Insight page. Also, for an in-depth look at what opportunity exists amid today’s climate, check out our latest white paper: How Business and Technology Leaders Can Spearhead Recovery and Define the Post-crisis Economy.

Sign Up to Hear More

Get notified when more posts like “Banks on the Front Lines with CARES Act: EIDL & PPP” are available.

  • This field is for validation purposes and should be left unchanged.

Prescott Nichols

Head of Product & Business Development
Prescott Nichols is Head of Product at SingleStone.

Leave a Reply

Your email address will not be published. Required fields are marked *