Today, the Small Business Administration is due to start doling out $350 billion in loans allocated by the $2 trillion coronavirus relief stimulus. But banks and other lenders responsible for administering those loans say they aren’t yet prepared to do so, and interest rates are already higher than initially proposed.
The Paycheck Protection Program (PPP), as it’s called, represents the bulk of federal relief efforts for small-businesses like bars and restaurants. Businesses of fewer than 500 employees can apply for these government guaranteed loans from banks and other lenders to help them cover payments like utilities, rent, payroll, and mortgage interest. Loans are capped at $10 million, or 2.5 times the average monthly payroll of a particular business, not counting salaries of workers making more than $100,000. In short, PPP loans are a potential lifeline, much larger than separate SBA disaster grants of $10,000, which are also available to small-businesses harmed by COVID-19.
In a press conference yesterday, Treasury Secretary Steven Mnuchin promised that the PPP loans “will be up and running tomorrow,” while also announcing that the program would increase the interest rate that banks and other lenders could charge: That’s now 1 percent after banks reportedly balked at an initially lower rate of 0.5 percent — though prior guidance had called for 4 percent cap instead. PPP loans can also be forgiven, especially if they go toward covering payroll (though the SBA hasn’t issued final guidance on loan forgiveness).
But after Mnuchin’s remarks last night, JP Morgan Chase — the country’s largest bank — emailed customers to admit that it would “most likely not be able to start accepting applications on Friday, April 3rd as we had hoped.” The Treasury department only released its “Interim Final Rule” laying out the program guidelines late Thursday, leaving banks little time to prepare tools like web portals ahead of a midnight start to the program.
“30 million small-businesses will be beating down the doors for capital tomorrow,” tweeted Brock Blake, CEO of a small-business loan marketplace called Lendio. “It’s a DISASTER waiting to happen.”