Small businesses have become eligible to apply for loans today, a process that leaves many people confused as to whether or not they qualify.
Treasury Secretary Steven Mnuchin yesterday released guidelines for small businesses wishing to apply for loans through the Paycheck Protection Program (PPP), created as part of the $ 2 trillion COVID-19 relief program.
The spread of the virus has led businesses across the country to cut hours or shut down altogether. Those wasted weeks could be enough to tip nearly half of small businesses into the red.
Here’s what we know so far.
Who is eligible
About $ 349 billion has been set aside for the program. Businesses with up to 500 employees will be able to apply for loans of up to $ 10 million with an interest rate of 1%. Independent contractors and freelancers will also be able to apply for these loans starting next Friday. According to the rules, borrowers cannot receive more than one PPP loan.
This program will be open until June 30, 2020. The Treasury Department advises people to apply as soon as possible due to a funding cap.
The conditions of the loan remission
Loan amounts will be forfeited if they are used to cover salary costs, most mortgage interest, rent and utility costs for an eight week period after the loan is granted.
Small business owners will owe money when their loan matures if they use the loan amount for anything other than these items. The pardon will also be reduced if they decrease their full-time workforce or decrease wages and salaries by more than 25% for any employee who earned less than $ 100,000 in 2019.
Where you can apply
You can apply for a loan to any SBA lender or any federally insured depository institution, federally insured credit union, and participating farm credit system institution.
Jovita Carranza, head of the Small Business Administration, said on Friday that the PPP had processed 13,669 loans, valued at over $ 4.3 billion. Earlier today, Mnuchin said that most of the loans who have been treated have gone through community banks. Some large banks, like Bank of America and JPMorgan Chase, are also accepting applications, while others, like Wells Fargo, say they currently cannot.
What is the problem
Bank of America reportedly denied applicants not having credit cards with them. Florida Senator Marco Rubio said such a rule was not written by Congress. It’s a complicated program that has raised concerns from banks, who are concerned about liability if a business lies about its loan application. Banks are supposed to verify that companies have been operating for a few months and are paying their employees.
There are other sources of funding that small businesses can tap into. Samantha Fields from Marketplace has compiled a list of tips and resources for small business owners. Businesses can, for example, apply for a loan of up to $ 10,000 using the Economic Disaster Loan Program. Help may also be available in cities like Chicago, which has established a $ 100 million fund offering loans.