US Small Business Administration, Treasury Mobilize to Distribute Funds

The US Small Business Administration and Treasury Department have begun mobilizing credit unions and banks to provide small businesses with the capital they need following president Trump’s signing of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

The CARES Act establishes a new USD 349bn Paycheck Protection Program. The Program will provide much-needed relief to millions of small businesses so they can sustain their businesses and keep their workers employed.

The new loan program will help small businesses with their payroll and other business operating expenses.

It will provide critical capital to businesses without collateral requirements, personal guarantees, or SBA fees all with a 100% guarantee from SBA. All loan payments will be deferred for six months.

Most importantly, the SBA will forgive the portion of the loan proceeds that are used to cover the first eight weeks of payroll costs, rent, utilities, and mortgage interest.

The Paycheck Protection Program is specifically designed to help small businesses keep their workforce employed. 

Visit SBA.gov/Coronavirus for more information on the Paycheck Protection Program.

The new loan program will be available retroactive from Feb. 15, 2020, so employers can rehire their recently laid-off employees through June 30, 2020.

Loan Terms and Conditions

All small businesses, including non-profits, Veterans organizations, Tribal concerns, sole proprietorships, self-employed individuals, and independent contractors, with 500 or fewer employees, or no greater than the number of employees set by the SBA as the size standard for certain industries

Maximum loan amount is up to USD 10m. Loan forgiveness if proceeds used for payroll costs and other designated business operating expenses in the 8 weeks following the date of loan origination (due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs)

All loans under this program will have an interest rate of 0.5%, a maturity of 2 years, first payment deferred for six months and come with a 100% guarantee by SBA

No collateral, no personal guarantees and no borrower or lender fees payable to SBA are required.

SBA’s announcement comes on the heels of a series of steps taken by the Agency since the president’s Emergency Declaration to expeditiously provide capital to financially distressed businesses affected by the Coronavirus (COVID-19) pandemic.

Since March 17, SBA has taken actions including the declaration of all states and territories eligible for Economic Injury Disaster Loan assistance, a 1-year deferment on Economic Injury Disaster Loans provided due to COVID-19, automatic deferment of previous disaster loans for homeowners and businesses through 2020, and a waiver of garnishments through 2020.

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