The Small Business Administration has bumped up to 1% the interest rate lenders may charge small businesses under a $350 billion U.S. relief program after lenders complained that the previous approved rate of 0.5% was below even their own cost of funds.
U.S. Treasury Secretary Steven Mnuchin and Small Business Administration Administrator Jovita Carranza released additional guidelines for the program just a few hours before it is expected to become widely available Friday. Banks and other lenders that are key to carrying it out had said they lacked guidance on how to complete the loans, including what documentation is required from borrowers and how to verify it.
The program, part of the $2 trillion stimulus package signed by President Donald Trump on March 27, is central to help small businesses survive the devastating impact of the coronavirus outbreak. It includes the Paycheck Protection Program, which allows small businesses to apply for loans of as much as $10 million with payments deferred for six months,
Assistance payments to individuals, a separate program of the coronavirus relief legislation, will begin showing up in bank accounts within two weeks, Mnuchin also said Thursday at a White House briefing.
“You’ll get the money,” Mnuchin said. The original plan was for payments to be arriving in three weeks.
The loans to small business, which are guaranteed by the federal government and don’t require collateral, will be forgiven if funds are used for payroll costs, mortgage interest, rent and utility payments for two months and if businesses retain and rehire employees.
A senior administration official, speaking on condition of anonymity, told reporters on Tuesday there could be millions of applications when the program goes live on Friday, with the idea funds would be disbursed quickly –- even the same day — on a first-come, first-served basis.
But lenders complained it wouldn’t be possible to process the loans that quickly without having more guidance from SBA, and they were awaiting more information.