Some details emerged Thursday about new small business loans that are part of the relief bill passed by the U.S. Senate Wednesday night.
The U.S. House of Representatives is expected to vote on the measure Friday.
While the bill is not finalized until passed, the Wall Street Journal reported on several aspects of the bill that are so far intact. And government officials are saying money can get into the hands of businesses fairly quickly and portions of loans may be forgiven in some cases.
Worth noting: the loans for small businesses in the relief bill that are outlined below are different from the current SBA disaster loans administered directly by SBA that are available now and that have a $2 million maximum.
Highlights of the Small Business Relief Package according to the Wall Street Journal:
- Businesses and nonprofits with fewer than 500 employees are eligible. Borrowers need to have been in business as of Feb. 15 and paid employee salaries and payroll taxes or paid independent contractors.
- Eligibility for applying will be “significantly relaxed” compared to typical protocols. Proof of payroll costs will be the main standard.
- Once the bill is passed and guidelines are issued, borrowers will apply through banks, credit unions and other lenders. This is good news because private banks can typically move faster than a government agency. The Treasury Department is expected to issue new guidelines that mean almost all FDIC-insured banks can make SBA loans.
- The money is expected to get to small businesses fairly quickly. “By the end of next week, we will have a very simple process where these can be made and disbursed in the same day,” Treasury Secretary Steve Mnuchin said at a press conference Wednesday according to the Wall Street Journal.
- Even better news: those loans, or a portion of them, won’t have to be paid back in some cases. There is a loan forgiveness part of the bill for businesses that keep their workers or rehire ones that were laid off. Portions of the loan spent on payroll, rent payment, mortgage obligations and utilities during an eight-week period can be forgiven. The amount of forgiveness will take into account the number of workers retained or rehired, according to the WSJ.
- The maximum amount that can be borrowed is $10 million with the formula based on payroll expenses. The maximum interest rate is 4% and borrowers can defer payments for six months to a year.
Again, the bill has not passed the House of Representatives yet and needs to be signed by President Trump. The House is expected to vote on the measure Friday.
Once it is approved, the real question will be how quickly the loans can get into the hands of the millions of small businesses that need them.
