When the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law over a week ago, part of the $2 trillion stimulus package was earmarked to provide short-term financial assistance to small businesses confronted with crippling disruption.
Since the $350 billion loan program came online last Friday, banks have seen overwhelming demand, forcing lawmakers to consider augmenting the program less than two weeks after it became law. The Federal Reserve said at the beginning of the week that it would create a new program to finance loans that banks and other lenders make through the government’s emergency small-business lending program, a move designed to free up financial firms to make more loans guaranteed by the Small Business Administration’s (SBA) Payroll Protection Program (PPP).
PPP loans are designed to help small businesses stay in business if impacted by COVID-19. Whether they are facing closure or just a slow-down due to illness, decreased customer demand or government mandate, these loans offer small businesses a lifeline. To qualify, an employer must have fewer than 500 employees or meet current SBA size standards (which may include some companies with more than 500 employees). Self-employed individuals and sole proprietors are also eligible.
Funds are now available and the process is streamlined to take about three days from application to approval. There are more than 800 existing SBA-certified lenders, including banks, credit unions, and other financial institutions. Check with your existing lender to see if they will be offering these special PPP loans – if they don’t, SBA will be expediting the process for lenders to get approved and you can request they start that process.
US Treasury Payroll Protection Plan Fact Sheet and Application
While the current small-business program is aimed at helping companies cover payroll and other essential expenses for roughly two months, lawmakers are now looking at providing support for a longer period. House Democrats have been eyeing releasing a CARES 2 bill next week, and voting on it after April 20 according to people familiar with the efforts. Both parties had expressed optimism about adding an additional $250 billion in funding through the senate this week. However, disagreements over the inclusion of disaster assistance grants and more emergency funding for hospitals and states have delayed approval for the time being.
The Federal Reserve also unveiled a $2.3 trillion effort to bolster local governments and larger businesses, outlining a plan to work through banks to offer 4-year loans to companies of up to 10,000 employees (beyond the 500 employee benchmark used by the SBA PPP) and directly buy the bonds of states and more populous counties. The impact of COVID-19 is proving to be far beyond that of the physical toll. Most business sectors, including medicine, will be feeling the economic impacts of a contracted marketplace for months to come.