The Treasury Department and Small Business Administration (SBA) have rolled out applications for small businesses to receive forgivable loans for payroll and other basic expenses amid the economic toll of the COVID-19 crisis. However, banks, credit unions, and other lenders say the $349 billion program doesn’t offer clear guidelines on how to handle the massive surge of loan applications that overwhelmed the system.
Bank of America stated that in its first hours accepting loan applications, they received 58,000. That’s approximately $6 billion in loans since they opened their online portal at 9:00 a.m. this morning (April 3). Meanwhile, CNBC reports that Bank of America was the first major bank to begin accepting applications during the program’s chaotic initial rollout.
At a recent White House briefing, US Treasury Secretary, Steven Mnuchin, stated, “I want to make sure this part of the economy is ready and intact when we’re ready to reopen”. “Now, let me just be clear, that doesn’t mean everybody is going to get their loan tomorrow.”
The Small Business Administration’s Paycheck Protection Program (PPP) is a key part of the economic stimulus package. It allocates $349 billion for small businesses to access forgivable loans for payroll and overhead. The program offers loans of up to $10 million at 1% interest. This is applicable to companies and nonprofits with fewer than 500 workers to cover two months of payroll and overhead. If the borrower retains workers and doesn’t cut their wages, the government will forgive most or all of the loan and repay bank lenders.
The question now is, will $349 billion be enough? House Speaker, Nancy Pelosi has already indicated not. She’s pushed for more small business loan funding, additional direct payments to individuals, and the extension of enhanced unemployment insurance. For now, time will tell as each day small business owners get one step closer to sorely needed funds.