The U.S. Small Business Administration and Treasury Department announced what was described as a mobilization effort of banks and other lending institutions to provide small businesses with capital.
The CARES Act establishes a new $349 billion Paycheck Protection Program. The Program will provide relief to millions of small businesses, a release stated.
“This unprecedented public-private partnership is going to assist small businesses with accessing capital quickly. 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,” said SBA Administrator Jovita Carranza. “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.”
The new loan program will help small businesses with their payroll and other business operating expenses.
It will provide capital to businesses without collateral requirements, personal guarantees, or SBA fees.
All loan payments will be deferred for six months. 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.
Visit SBA.gov/Coronavirus for more information on the Paycheck Protection Program.
- The new loan program will be available retroactive from Feb. 15, 2020, so employers can rehire their recently laid-off employees through June 30, 2020.
- 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 8 weeks following the date of loan origination (due to likely high subscription, it is anticipated that not more than 25 percent 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 percent.
- Maturity of two years
- First payment deferred for six months
- 100 percent guarantee by SBA
- No collateral
- No personal guarantees
- No borrower or lender fees payable to SBA
Since March 17, SBA has taken the following steps:
- Declared all states and territories eligible for Economic Injury Disaster Loan assistance
- 1-year deferment on Economic Injury Disaster Loans provided due to COVID-19
- Automatic deferment of previous disaster loans for homeowners and businesses through 2020
- Waiver of garnishments through 2020