Can banks really start writing emergency loans to small businesses today as expected? Christian Petersen/Getty Images
COVID-19

Why small business loans for COVID-19 relief may be delayed

David Brancaccio, Nancy Marshall-Genzer, and Alex Schroeder Apr 3, 2020
Can banks really start writing emergency loans to small businesses today as expected? Christian Petersen/Getty Images

Banks are bracing themselves for wave of applications for the crisis small business loan program set up in the $2 trillion federal stimulus. It’s supposed to start today, but some big banks say they’re not ready.

Marketplace’s Nancy Marshall-Genzer explains the problem. The following is an edited transcript of her conversation with “Marketplace Morning Report” host David Brancaccio.

Nancy Marshall-Genzer: Small businesses will be applying for these loans through banks. And the banks have been waiting for final guidelines from the federal government on exactly how the small business loan program will work. Those guidelines went out last night, just hours before the program was supposed to start. It looks like there’ll be delays at even some of the biggest banks. A message on the JPMorgan Chase website says it’s not accepting applications at this time. Bank of America’s website says its small business clients can apply for the loans quote once final guidelines are released. Wells Fargo isn’t accepting applications yet either.

David Brancaccio: Why did the guidelines take so long?

Marshall-Genzer: This is a complicated program. It’s going to be administered by banks, and they had complaints. Small banks said the interest rate was too low. So the Treasury Department raised it. Other banks are worried about liability if a business lies on the loan application. The banks are supposed to verify that the business has been up and running for the last few months, and paying its employees.

Brancaccio: And how much money are we talking about here?

Marshall-Genzer: It’s about $350 billion. There’s some concern that more established businesses will snap that up, squeezing out the smallest ones. But Treasury Secretary Steven Mnuchin says he’ll ask Congress for more money if the $350 billion runs out.

COVID-19 Economy FAQs

What does the unemployment picture look like?

It depends on where you live. The national unemployment rate has fallen from nearly 15% in April down to 8.4% percent last month. That number, however, masks some big differences in how states are recovering from the huge job losses resulting from the pandemic. Nevada, Hawaii, California and New York have unemployment rates ranging from 11% to more than 13%. Unemployment rates in Idaho, Nebraska, South Dakota and Vermont have now fallen below 5%.

Will it work to fine people who refuse to wear a mask?

Travelers in the New York City transit system are subject to $50 fines for not wearing masks. It’s one of many jurisdictions imposing financial penalties: It’s $220 in Singapore, $130 in the United Kingdom and a whopping $400 in Glendale, California. And losses loom larger than gains, behavioral scientists say. So that principle suggests that for policymakers trying to nudge people’s public behavior, it may be better to take away than to give.

How are restaurants recovering?

Nearly 100,000 restaurants are closed either permanently or for the long term — nearly 1 in 6, according to a new survey by the National Restaurant Association. Almost 4.5 million jobs still haven’t come back. Some restaurants have been able to get by on innovation, focusing on delivery, selling meal or cocktail kits, dining outside — though that option that will disappear in northern states as temperatures fall. But however you slice it, one analyst said, the United States will end the year with fewer restaurants than it began with. And it’s the larger chains that are more likely to survive.

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