Loan help for small businesses during the pandemic. Last week the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed and on Tuesday, the Small Business Administration (SBA) and the U.S. Treasury Department announced they “initiated a robust mobilization effort of banks and other lending institutions to provide small businesses with the capital they need.”
The $349 billion Paycheck Protection Program, which is part of the CARES Act, will give small businesses access to capital. The SBA’s goal, according to Administrator Jovita Carranza, “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.”
Lenders, using their own systems and processes to make these loans, can start the process as early as this week.
What’s in the legislation? It provides “eight weeks of payroll and [some overhead costs] to keep workers employed,” says Treasury Secretary Steven Mnuchin, who adds they “expect to have this program up and running by April 3rd.” He says “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.”
No collateral or personal guarantees are required for this new loan program—and there won’t be any SBA fees. All loan payments will be deferred for six months. And, 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.
All loans under this program will have the following identical features:
- Interest rate of 0.5%
- Maturity of 2 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 Loan stock photo By karen roach/Shutterstock