New Payroll Protection Program for Small Business

Daniel Fowler
April 3, 2020

The Paycheck Protection Program ("PPP") authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. Josh Hawley (R-Mo.) noted the expanded access of the CARES Act as compared to section 7 (a) loans from the SBA which "exclude some organizations due to their principal religious goal".

Due to the volume of applications likely to be processed, Frost Bank is making the loans available to existing business customers only, said Bill Day, senior vice president and communications chief. And only businesses with a previous relationship to the lender can obtain them. The loans do not require collateral or personal guarantees.

They can get up to 2.5 times their total monthly payroll (with a maximum of $10 million).

A BBVA spokesperson said the bank is "committed to helping our clients and communities through this situation, especially our small business clients, as they are the lifeblood of the U.S. economy".

The Paycheck Protection Program is for any business with fewer than 500 employees, including sole proprietorships, independent contractors and self-employed workers affected by the coronavirus.

On Friday, April 3, 2020, the Small Business Administration lenders will be launching the Paycheck Protection Program ("PPP"). Loan proceeds that are spent on eligible business expenses, including payroll, utilities, rent and mortgage interest within eight weeks will be forgiven, assuming the company maintains, or quickly rehires to, its pre-coronavirus level of employment and wages. "While we are looking at every resource possible to support our small businesses and workforce in the face of the significant challenges they are facing, we know that federal loans, like the Paycheck Protection Program, will be paramount to economic recovery efforts in the state". "If you are a smaller business, and don't have a lot of payroll, then this might not be for you", he adds.

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In a separate issue, several members of Congress have pushed the SBA to issue guidance to lenders that nonprofit organizations, including churches and religiously affiliated organizations, were eligible to apply for loans. It's mind-blowing to see what they're doing, how quickly they're doing it, how flexible they're being.

"Community bank lenders can not "break even" with such a low rate of interest and for many it will not be economic or feasible to participate in the program", wrote ICBA CEO and President Rebeca Romero Rainey.

Industry experts predict a "feeding frenzy", CNBC warned on Thursday, painting a nightmarish scenario in which millions of profit-starved businesses overload the application website clamoring for the "first come, first served" loans as soon as its (virtual) doors open - creating an Obamacare-esque debacle that could snarl distribution of the aid for months.

Borrowers can apply for the loans through participating banks starting tomorrow through June 30.

Any amount not forgiven must be repaid within two years, the SBA announced Tuesday, at 0.5% interest. That may not be enough to meet demand, but it is possible Congress will decide to put more funds toward this program. "Certainly we're encouraging them to go into that bank to get those loans and apply for them". Chipol spoke about what all Loan packages small businesses should be looking at. She shed some light with some details on the contents of this bill and how it can help local small businesses.

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