Small banks have processed $835M for small business loan relief, Mnuchin says

Small banks have processed $835M for small business loan relief, Mnuchin says

On behalf of the Borough of Hawthorne and the Hawthorne Chamber of Commerce - we have been monitoring the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act on the new initiatives from the Small Businesses Administration (SBA).

The federal programs are part of the $2 trillion stimulus law that also includes funding for large businesses, states and localities, and individuals.

"While we would have liked to continue to make this temporary loan relief measure available to customers, given the current environment, it was not feasible as the incredible demand far exceeded the capacity of this program", President and CEO David Glidden said in a press release.

The bill established a new $349 billion program to help smalls keep their workforce on the payroll. You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan.

The loans may be used to pay fixed debts, payroll, accounts payable and other bills that can not be paid due to the impact of COVID-19, a SBA statement sad. Namely, firms like his won't be able to package loans like this and sell them to a larger capital source and sitting on them would eat up capital for other loans.

Many small businesses will likely qualify for Payroll Protection loans. To receive the aid, businesses must have been operational by at least February 15.

Economic development organizations in Louisiana have urged small businesses to begin applying immediately for the loans, voicing concerns that the program will be capped at $349 million.

Small businesses and sole proprietorships can apply for a loan through the Paycheck Protection Program starting Friday (April 3). Yet when he logged onto the bank's website early in the morning, he was told he couldn't apply for a loan because he'd never borrowed money from Bank of America before.

Independent contractors and the self-employed could be especially hurt since they will not be eligible to apply until April 10 under guidance from the Treasury Department.

Some lenders will have to become certified by the SBA before they can participate in the PP program.

Updated federal guidelines for the program were not issued until late Thursday night in a 31-page "interim final rules" document, just hours before the PPP was supposed to begin accepting applications, and most banks are still not ready. Loans are offered through any existing SBA 7 (a) lender or through any participating federally insured depositary institution, federally insured credit union, or Farm Credit System institution.

All loans are guaranteed by the SBA, and the SBA waives all guarantee fees. Although the SBA will be able to audit lenders and borrowers later, it will fall primarily to private bankers to make decisions about who should receive taxpayer-backed loans. The agency has yet to provide any application forms or criteria that these companies will have to meet.

Businesses can get a $10,000 emergency grant that does not have to be repaid.

The loans are created to provide a direct incentive for small businesses to keep their workers on payroll and may be forgiven if all employees are kept on payroll for eight weeks and the money is used for payroll, rent, mortgage interest or utilities.

Borrowers can still look to non-bank direct lenders, like Fountainhead, which is an SBA lender; as well as fintech companies like Funding Circle and Kabbage, which specialize in small business loans but aren't approved SBA lenders. See https://disasterloan.sba.gov/ela/.

The massive program has put major strains on the Small Business Administration.

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