The United States’ new $350 billion small-business coronavirus rescue loan program could see millions of applications when it launches on Friday, senior Trump administration officials said on Tuesday.
Officials from the U.S. Treasury and Small Business Administration, which are jointly administering the so-called Paycheck Protection Program, said they were working to ensure that processing capabilities, both in person at SBA lenders and online, would be able to handle high volumes of applications on Friday.
Funds will be allocated on a first-come, first-serve basis, the officials told reporters on a conference call. Banks and other SBA lenders have “delegated authority” to approve loans starting on Friday without a review from the agency.
The loans will be registered with the SBA to ensure that each qualifying business gets only one.
Lenders “will approve, with their short paperwork what they need to do and that loan will be made that day,” one of the officials said.
The small-business loan program is part of an unprecedented $2.2 trillion coronavirus economic package meant to reimburse businesses and households for weeks of lost income due to shutdowns and stay-at-home orders.
The Treasury and the SBA said earlier on Tuesday that the 0.5% interest rate loans, which could be stretched out for two years, would cover payroll and other fixed costs such as rent, mortgages and utilities over the next eight weeks.
Repayment will be deferred for six months and the loans fully forgiven if used for payroll and other qualifying expenses.
A “stripped down” loan application is just four pages, with the loan amounts determined by 2.5 times average monthly payroll amounts. They’re for firms with up to 500 employees, with a $100,000 annualized cap on each employees’ salary.
There is no collateral, but business owners must provide documentation verifying payroll amounts and employee numbers, mortgage, rent and utility costs.
At the end of eight weeks, borrowers who verify that they spent the funds on payroll and other expenses can have that portion of the loan forgiven.
Loans can be booked almost immediately, but disbursements depend on individual banks.
The officials said the SBA was expanding its roster of lenders to all federally insured banks, credit unions and farm credit institutions, which would expand the reach of the program to businesses that do not have existing relationships with SBA lenders.
The program largely puts the lenders into an administrative role, processing and verifying applications and disbursing funds, while foregoing their normal loan underwriting and SBA documentation processes.
All of the loans are guaranteed by the U.S. Treasury.