Banks Cleared to Make Relief Loans

Federal relief for small businesses slammed with cash-flow challenges during the COVID-19 recession has begun flowing, as banks have the green light to begin making loans under the CARES Act’s Paycheck Protection Program.

PPP has set aside $349 billion for small business loans to cover qualified payroll costs, rent, utilities, and interest on mortgage and other debt payments, loans that will be forgiven if employers reach certain goals for retaining workers.

Sole proprietors and small businesses of up to 500 employees can apply through banks, credit unions, or nonbank lenders approved by the SBA or Department of Treasury, effective today. Independent contractors can file for those loans starting April 10. An application form for the program is here.

https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Application-3-30-2020-v3.pdf

All loans, regardless of the size of the borrower’s business, will have a maturity of 2 years and an interest rate of 0.5 percent, and 75 percent of the amount forgiven must be used to cover payroll costs. The remainder can go toward the non-payroll costs.