Loans available for small businesses that have had to lay off employees, prevent future losses
Following President Trump’s signing of the Coronavirus Aid, Relief and Economic Security Act (CARES), the SBA administrator Jovita Carranza and Secretary of the Treasury Steven T. Mnuchin announced that the SBA and the Treasury Department have launched a strong effort to mobilize banks and other credit institutions to provide small businesses with working capital to cover significant costs and avoid layoffs.
The CARES Act establishes a new $ 349 billion paycheck protection program. The program will bring much needed relief to millions of small businesses so that they can support their operations and keep their employees working.
“This unprecedented public-private partnership will help small businesses access capital quickly. Our goal is to position lenders as the single point of contact for small businesses – application, loan processing and disbursement of funds will all be administered at the community level, ”said Administrator Carranza. “Speed is the key word; emergency capital requests can begin as early as this week, with lenders using their own systems and processes to make these loans. We remain committed to supporting our country’s more than 30 million small businesses and their employees, so that they can continue to be the fuel of our country’s economic engine.
“This legislation provides for small business retention loans to provide eight weeks of wages and some overhead to keep workers employed,” Secretary Mnuchin said. “The Treasury and Small Business Administration expect this program to be up and running by April 3 so businesses can approach a participating SBA 7 (a) lender, bank or credit union,” apply for a loan and be approved the same. daytime. The loans will be canceled as long as the funds are used to keep the employees on the payroll and for certain other expenses. “
The new loan program will help small businesses pay their payroll and other operating expenses. It will provide critical capital to businesses with no collateral requirements, personal guarantees, or SBA fees, all with a 100% SBA guarantee. All loan payments will be deferred for six months. More importantly, the SBA will forgive the portion of the loan proceeds that is used to cover the first eight weeks of salary costs, rent, utilities, and mortgage interest.
The Paycheque Protection Program is specially designed to help small businesses keep their workforce employed. Visit SBA.gov/Coronavirus for more information on the Paycheck Protection Program.
- The new loan program will be available retroactively from February 15, 2020, so employers can rehire their recently laid-off employees until June 30, 2020.
- Eligible Businesses: All businesses, including nonprofits, veterans organizations, tribal businesses, sole proprietorships, self-employed, and independent contractors, with 500 or fewer employees, or no more than the number of employees set by the SBA as the standard size for certain industries
- Maximum loan amount up to $ 10 million
- Loan cancellation if proceeds are used for salary costs and other designated operating expenses within 8 weeks of loan grant date (due to likely high underwriting it is expected that no more than 25% of the canceled amount may be intended for non-salary purposes (costs)
- All loans under this program will have the following identical characteristics:
- 0.5% interest rate
- 2 years maturity
- First payment deferred by six months
- 100% guaranteed by SBA
- No warranty
- No personal guarantee
- No borrower or lender fees payable to the SBA
The SBA’s announcement follows a series of actions the agency has taken since the President’s declaration of emergency to quickly provide capital to financially distressed businesses affected by the coronavirus pandemic (COVID-19). Since March 17, SBA has taken the following actions:
Visit SBA.gov/Coronavirus for more information on SBA Small Business Help. Additional information about the Paycheck Protection Program is available on the SBA website at: https://www.sba.gov/funding-programs/loans/paycheck-protection-program-ppp
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