Treasury makes coronavirus loan terms less favorable for small businesses
Steven Mnuchin, U.S. Secretary of the Treasury, speaks during a Coronavirus Task Force press conference at the White House in Washington, DC, United States, Thursday, April 2, 2020.
Kevin Dietsch | Bloomberg | Getty Images
The Treasury Department changed the terms of some loans offers small businesses during the coronavirus pandemic, making them less favorable to borrowers, experts say.
The loans in question are made through the Paycheque Protection Program, which provides forgivable loans up to $ 10 million to businesses with 500 or fewer employees.
The program, which officially open to many borrowers Friday morning, will distribute up to $ 349 billion to struggling small businesses to help cover costs like payroll, rent and utilities. Loans are made by lenders approved by the Small Business Administration and other institutions.
In the early guidance, the Treasury Department said banks would charge a fixed interest rate of 0.5% and that the unsatisfied portion of a loan could be repaid over 10 years.
Banks were reluctant to offer loans on original terms and pressured federal officials to change them, says founder Roger DaSilva of Realm Startup Advisory, which serves as an outsourced CFO for small businesses.
Small enterprises may be eligible for cancellation of all or part of their loan, for the portion used over an eight week period to cover salary costs (excluding salaries over $ 100,000), rent, utilities and mortgage interest.
The deployment of the program was loaded with confusion and frustration among borrowers and lenders, who didn’t receive key advice and a formal loan application until Thursday evening.
“I know there are a lot of small, hard-working businesses that couldn’t process their claims this week,” Treasury Secretary Steven Mnuchin said. “They shouldn’t care. There’s a lot of time. There’s a lot of money left. It’s a great opportunity for small businesses to make sure they keep everyone at work and bring back to the job. work the people they have made redundant. “
He added, “If we run out of money, we’ll go back to Congress and get more money for small business.”
Applications were opened for small businesses and sole proprietorships on April 3. Independent contractors and self-employed workers can apply from April 10.