COVID-19

Here’s what we know about the government’s small business loan program (so far)

Janet Nguyen Apr 3, 2020
andresr/Getty Images
COVID-19

Here’s what we know about the government’s small business loan program (so far)

Janet Nguyen Apr 3, 2020
andresr/Getty Images

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.

Who’s eligible 

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.

Additional resources  

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

It’s still the question on everyone’s minds: What’s going on with extra COVID-19 unemployment benefits?

The $600-a-week payments have ended, officially, as of July 31. For now, there is no additional federal pandemic unemployment assistance. House Democrats want to renew the $600 payments. Senate Republicans have proposed giving the unemployed 70% of their most recent salary by this October, when state unemployment offices have had time to reconfigure their computer systems to do those calculations. Until then, jobless workers would just get another $200. But, nothing has been agreed upon yet.

What’s the latest on evictions?

For millions of Americans, things are looking grim. Unemployment is high, and pandemic eviction moratoriums have expired in states across the country. And as many people already know, eviction is something that can haunt a person’s life for years. For instance, getting evicted can make it hard to rent again. And that can lead to spiraling poverty.

Which retailers are requiring that people wear masks when shopping? And how are they enforcing those rules?

Walmart, Target, Lowe’s, CVS, Home Depot, Costco — they all have policies that say shoppers are required to wear a mask. When an employee confronts a customer who refuses, the interaction can spin out of control, so many of these retailers are telling their workers to not enforce these mandates. But, just having them will actually get more people to wear masks.

You can find answers to more questions on unemployment benefits and COVID-19 here.

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