Jovita Carranza, Small Business Association (SBA) administrator, and Steven T. Mnuchin, Treasury Department secretary, recently announced that the SBA and Treasury Department have initiated a robust mobilization effort of banks and other lending institutions to provide small businesses with the capital they need as a result of the COVID-19 crisis. The Coronavirus Aid, Relief, and Economic Security (CARES) Act establishes a new $349 billion Paycheck Protection Program that will reportedly provide relief to millions of small businesses so they can sustain their businesses and keep their workers employed.
“This unprecedented public-private partnership is going to assist small businesses with accessing capital quickly,” said Carranza. “Our goal is to position lenders as the single point-of-contact for small businesses—the application, loan processing, and disbursement of funds will all be administered at the community level. Speed is the operative word; applications for the emergency capital can begin as early as this week, with lenders using their own systems and processes to make these loans. We remain committed to supporting our nation’s more than 30 million small businesses and their employees, so that they can continue to be the fuel for our nation’s economic engine.”
“This legislation provides small business job retention loans to provide eight weeks of payroll and certain overhead to keep workers employed,” said Mnuchin. “Treasury and the Small Business Administration expect to have this program up and running by April 3rd so that businesses can go to a participating SBA 7(a) lender, bank, or credit union, apply for a loan, and be approved on the same day. The loans will be forgiven as long as the funds are used to keep employees on the payroll and for certain other expenses.”
The new loan program will help small businesses with their payroll and other business operating expenses. It will provide critical capital to businesses without collateral requirements, personal guarantees, or SBA fees—all with a 100% guarantee from the SBA. All loan payments will be deferred for six months. Most importantly, the SBA will forgive the portion of the loan proceeds that are used to cover the first eight weeks of payroll costs, rent, utilities, and mortgage interest.
The Paycheck Protection Program is specifically designed to help small businesses keep their workforce employed. The new loan program will be available retroactive from February 15, 2020, so employers can rehire their recently laid-off employees through June 30, 2020. Loan terms and conditions include:
- Eligible businesses—all small businesses, including non-profits, veterans organizations, tribal concerns, sole proprietorships, self-employed individuals, and independent contractors, with 500 or fewer employees or no greater than the number of employees set by the SBA as the size standard for certain industries
- Maximum loan amount up to $10 million
- Loan forgiveness if proceeds used for payroll costs and other designated business operating expenses in the eight weeks following the date of loan origination (due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs)
- All loans under this program will have the following identical features: interest rate of 0.5%, maturity of two years, first payment deferred for six months, 100% guarantee by the SBA, no collateral, no personal guarantees, no borrower or lender fees payable to SBA
Additional details are available at www.sba.gov/coronavirus.