According to a senior official from the Trump Administration, millions of applicants are likely to tap its $350 billion small-business coronavirus rescue loan program when it launches on Friday.
Officials from the U.S. Treasury and Small Business Administration, which are jointly administering the Paycheck Protection Program, said, they were collaborating closely to ensure that processing capabilities, both in person at SBA lenders and online, would be able to handle high volumes of applications on the launch date.
Application for loans will be processed on a first-come, first-serve basis, said officials during a conference call. Banks and other SBA lenders have “delegated authority” to approve loans starting on Friday without a review from the agency.
Loans will be registered with the SBA in order to ensure that each qualifying business gets only one. Lenders “will approve, with their short paperwork what they need to do and that loan will be made that day,” said an official.
The Paycheck Protection Program is part of a $2.2 trillion coronavirus economic package program designed to reimburse businesses and households expenses for weeks of lost income due to shutdowns.
Earlier on Tuesday, the Treasury and the SBA stated, the 0.5% interest rate loans, which could be stretched out for two years, would cover payroll and other fixed costs such as rent, mortgages and utilities over the next eight weeks.
Repayment of the loans will be deferred for a period of six months and they could even be written off if the funds are used for payroll purposes as well as other qualifying expenses.
A “stripped down” loan application form is just four pages, with the loan amounts determined by 2.5 times average monthly payroll amounts. They’re for firms with up to 500 employees, with a $100,000 annualized cap on each employees’ salary.
Although there is no collateral, business owners will have to provide documentation denoting verifiable payroll amounts along with employee numbers, mortgage, rent and utility costs.
At the end of eight weeks, borrowers who verify that they spent the funds on payroll and other qualifying expenses can have that portion of the loan written off.
Incidentally, the SBA was expanding its roster of lenders to all federally insured banks, credit unions and farm credit institutions, which would expand the reach of the program to businesses that do not have existing relationships with SBA lenders.
All loans are guaranteed by the U.S. Treasury.