Wells Fargo stops taking applications for small business relief loans

Wells Fargo stops taking applications for small business relief loans

Wells Fargo announced Sunday evening that while the bank operates under a regulatory asset cap, it has exceeded its $10 billion lending ability under the SBA's Paycheck Security program.

One of the country's biggest lenders will largely be kept on the sidelines in the middle of the epidemic-induced downturn which has some talk of an imminent economic depression.

Wells Fargo CEO Charlie Scharf said on Sunday, “Today, the company continues to operate in compliance with an asset cap imposed by its regulator due to actions of past leadership.”

Although we are working aggressively to build balance sheet lending potential, we are constrained in our continued ability to use our strong capital and liquidity position to expand additional credit. 

“Since I arrived at the company, I have been clear that we will direct all resources necessary to do the work required by our regulators and we are in the process of doing so,” Charlie Scharf said.

Wells Fargo having to close its loan window under the special SBA program is likely to stun millions of small business owners around the country who bank with Wells Fargo and were preparing to apply this week for the SBA PPP loans that will potentially become grants if the money were used to hold workers on the payroll and cover other qualifying expenses.

The lenders and accountants of small business owners expect a flood of loan applications to come in this week for the SBA program which started on April 3. 

"We are going to see a lot of action there. People are anxious to get in line quickly "to get money from the SBA PPP, Mike Stok, a partner in San Francisco accounting firm Murray Stok & Co., told me on Saturday about the scramble and anticipation for the SBA PPP that was already under way last Friday. 

Wells was one of the banks that refused to accept applications on the first day of the SBA PPP, April 3. Yet by April 4, Wells said it was enabling its small business clients to show interest in borrowing under the special SBA system on its website.

Wells Fargo said it would concentrate on loans of less than 50 workers to non-profits and small businesses. The San Francisco bank will donate to charities helping small business the fees it earns from the SBA PPP scheme. 

Wells Fargo said it'll review all customers '"expressions of interest" using the bank's online application through Sunday April 5 or provide them with information throughout the days ahead. 

“Since the beginning of this health crisis, Wells Fargo has provided substantial credit and liquidity to our customers to help them weather these uncertain times,” Charlie Scharf said.

Wells Fargo, Bloomberg News estimated last week, would have the capacity to lend more than $384 billion if it were not working under the asset cap. Under the recently enacted stimulus package called the CARES Act, the SBA PPP had been allocated $350 billion.

In recent weeks, many corporate clients have drawn down credit lines to boost their liquidity as the extent of the economic recession became more evident. 

Wells Fargo said it issued nearly $70 billion in new and expanded bonds and revolving loans to customers, small businesses and U.S. companies in March alone. 

The bank said that it has postponed more than 700,000 fees for its customers impacted by the coronavirus epidemic, totaling almost $1.8 billion, and accepted more than 750,000 fee refunds, exceeding $28 million.

Photo: Charles Scharf Photographer: Kyle Grillo.