Why small business loans for COVID-19 relief may be delayed
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 are the details of President Joe Biden’s coronavirus relief plan?
The $1.9 trillion plan would aim to speed up the vaccine rollout and provide financial help to individuals, states and local governments and businesses. Called the “American Rescue Plan,” the legislative proposal would meet Biden’s goal of administering 100 million vaccines by the 100th day of his administration, while advancing his objective of reopening most schools by the spring. It would also include $1,400 checks for most Americans. Get the rest of the specifics here.
What kind of help can small businesses get right now?
A new round of Paycheck Protection Program loans recently became available for pandemic-ravaged businesses. These loans don’t have to be paid back if rules are met. Right now, loans are open for first-time applicants. And the application has to go through community banking organizations — no big banks, for now, at least. This rollout is designed to help business owners who couldn’t get a PPP loan before.
What does the hiring situation in the U.S. look like as we enter the new year?
New data on job openings and postings provide a glimpse of what to expect in the job market in the coming weeks and months. This time of year typically sees a spike in hiring and job-search activity, says Jill Chapman with Insperity, a recruiting services firm. But that kind of optimistic planning for the future isn’t really the vibe these days. Job postings have been lagging on the job search site Indeed. Listings were down about 11% in December compared to a year earlier.
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