Paycheck Protection Program small-business loans to be available starting April 3
A network of community banks and financial institutions across the country is gearing up to implement one of the most ambitious economic relief programs in U.S. history as small businesses across the country weather coronavirus and its economic fallout.
The $2 trillion coronavirus relief package signed last week, officially known as the CARES Act, includes nearly $350 billion for a new federal small business loan program called the Paycheck Protection Program. The program is designed to get cash in the hands of suffering small businesses quickly, with less red tape and fewer guardrails than the SBA’s existing loan programs. It is designed to incentivize business owners to keep employees on payroll by offering them loan forgiveness.
Business groups say lenders are moving as fast as they can to make the loans available.
“Right now our focus is on speed in terms of making sure these banks have the ability to get loans onto main street quickly,” said Tom Sullivan, vice president of small business policy at the U.S. Chamber of Commerce, a lobbying group that is working with lenders who will be distributing the funds, which are backed by a federal loan guarantee.
The new loan program is separate from existing federal loan programs, including the Small Business Administration’s disaster relief loans. To learn about the SBA’s other relief programs, please visit the SBA’s COVID-19 resource center.
Here are the details on how small business owners can access the new federal “paycheck protection program.”
Q: How do I apply for a small business loan through the Paycheck Protection Program?
The Small Business Administration has a network of 1,800 approved lenders that process small business loans. If you are interested in a Paycheck Protection Program loan, you should first contact your bank to see if it is an SBA-approved lender. If your bank is not an SBA-approved lender, you can contact the SBA to find one.
Q: When will the new funding be made available to small businesses?
Treasury Secretary Steven Mnuchin said Monday on FoxBusiness network that small business loans will be made available starting Friday. Detailed instructions on how to apply for them are to be added to the Small Business Administration’s website, Mnuchin said.
Mnuchin has said in the White House’s daily press briefings that a system will be set up for same-day loan evaluation.
However, Hicham Oudghiri, chief executive of a small business-focused data analytics and fraud detection company called Enigma Technologies, said it would be difficult for most banks to meet that target without substantially increasing the risk of fraud. Most small businesses will take days just gathering the documents they need to apply, he said.
“Even the most sophisticated banks will have a hard time short cutting their processes to get money out the door this fast,” Oudghiri.
Q: Which businesses qualify under the Paycheck Protection Program?
Small businesses, nonprofits, tribal business concerns that meet the SBA’s standard business size definition, and veterans organizations organized under 501(c)(19) with fewer than 500 employees are eligible for loans under the program. Self-employed individuals, independent contractors and sole-proprieters are also eligible. To receive a loan your company must have been in business as of Feb. 15, 2020.
If you are in the food service business, the 500-employee cap is applied on a per physical location basis, according to a fact-sheet published by the U.S. Chamber of Commerce.