Here’s what we know about the government’s small business loan program (so far)
Small businesses became eligible to apply for loans today, a process that’s left many confused about whether or not they qualify.
Treasury Secretary Steven Mnuchin yesterday released the guidelines for small businesses that want to apply for loans through the Paycheck Protection Program (PPP), created as part of the $2 trillion COVID-19 relief package.
The spread of the virus has led businesses across the country to either cut hours or shut down entirely. These lost weeks could be enough to push nearly half of small businesses into the red.
Here’s what we know so far.
About $349 billion has been set aside for the program. Companies with up to 500 employees will be eligible to apply for loans of up to $10 million with a 1% interest rate. Independent contractors and freelancers will also be able to apply for these loans starting next Friday. According to the rules, borrowers cannot receive more than one PPP loan.
This program will be open until June 30, 2020. The Treasury Department is advising people to apply as quickly as possible because of a funding cap.
The terms of loan forgiveness
Loan amounts will be forgiven if they’re used to cover payroll costs, most mortgage interest, rent and utility costs during an eight-week period after the loan is granted.
Small business owners will owe money when their loan is due if they use the loan amount for anything other than those items. Forgiveness will also be reduced if they decrease their full-time employee headcount or if they decrease salaries and wages by more than 25% for any employee that made less than $100,000 in 2019.
Where you can apply
You can submit a loan application to any SBA lender or any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating.
Jovita Carranza, the head of the Small Business Administration, said on Friday that the PPP had processed 13,669 loans, valued at more than $4.3 billion. Earlier today, Mnuchin said most of the loans that have been processed have come through community banks. Some big banks, like Bank of America and JPMorgan Chase, are also accepting applications, while others, like Wells Fargo, say they’re currently unable to.
What the problem is
Bank of America reportedly denied applicants for not having credit cards with them. Florida Senator Marco Rubio said that such a rule was not written by Congress. It’s a complicated program that’s raised concerns from the banks, which are worried about liability if a business lies on its loan application. Banks are supposed to verify that businesses have been up and running for the last few months, and paying their employees.
There are other sources of funding small businesses can tap into. Marketplace’s Samantha Fields compiled a list of tips and resources for small business owners. Businesses can, for example, apply for a loan of up to $10,000 using the Economic Injury Disaster Loan Program. Help may also be available from cities like Chicago, which has created a $100 million fund offering loans.
COVID-19 Economy FAQs
What’s the outlook for vaccine supply?
Chief executives of America’s COVID-19 vaccine makers promised in congressional testimony to deliver the doses promised to the U.S. government by summer. The projections of confidence come after months of supply chain challenges and companies falling short of year-end projections for 2020. What changed? In part, drugmakers that normally compete are now actually helping one another. This has helped solve several supply chain issues, but not all of them.
How has the pandemic changed scientific research?
Over the past year, while some scientists turned their attention to COVID-19 and creating vaccines to fight it, most others had to pause their research — and re-imagine how to do it. Social distancing, limited lab capacity — “It’s less fun, I have to say. Like, for me the big part of the science is discussing the science with other people, getting excited about projects,” said Isabella Rauch, an immunologist at Oregon Health & Science University in Portland. Funding is also a big question for many.
What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?
Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”
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