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With $349 billion in emergency small business capital cleared, SBA and Treasury begin unprecedented public-private mobilization effort to distribute funds

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Wed, Apr 1st 2020 09:25 am
Metro Creative Graphics
Metro Creative Graphics

Following President Donald Trump’s signing of the historic Coronavirus Aid, Relief, and Economic Security (CARES) Act, Small Business Administrstion Administrator Jovita Carranza and Treasury Secretary Steven T. Mnuchin today announced 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.

The CARES Act establishes a new $349 billion Paycheck Protection Program designed to provide much-needed 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. 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,” Carranza said. “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.”

Mnuchin said, “This legislation provides small business job retention loans to provide eight weeks of payroll and certain overhead to keep workers employed. Treasury and the Small Business Administration expect to have this program up and running by April 3, 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.”

A press release said, “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 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. 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.

Loan Terms & Conditions

Eligible businesses: All businesses, including nonprofits, 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

There is loan forgiveness if proceeds are 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 SBA
  • No collateral
  • No personal guarantees
  • No borrower or lender fees payable to SBA

SBA’s announcement comes on the heels of a series of steps taken by the agency since the president’s emergency declaration to expeditiously provide capital to financially distressed businesses affected by the coronavirus (COVID-19) pandemic. Since March 17, SBA has taken the following steps:

Visit SBA.gov/Coronavirus for more information on SBA’s assistance to small businesses. Additional information about the Paycheck Protection Program can be found on the SBA website at: https://www.sba.gov/funding-programs/loans/paycheck-protection-program-ppp.

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