Small businesses across the country have secured a $ 370 billion lifeline in the $ 2,000 billion coronavirus aid bill approved Friday by the US House representatives. The greatest stimulus in US history, the bill includes relief for taxpayers and large businesses as well as small businesses.
But these companies want to know – what kind of relief will it bring?
Dave Ketchen is the leading Harbert researcher and professor of management at Auburn University, and he has reviewed legislation. He said time is perhaps the most important factor in question.
“I really think it’s a must have life jacket,” he said. “A big question is about implementation. If you throw a life jacket at someone and they drown before they have it, that is of no use to them. A big question is whether to how quickly that money will get into the hands of small businesses. ”
In short, he said the package uses a three-pronged approach.
The first part offers emergency grants of up to $ 10,000 from a $ 10 billion fund.
“It’s a nice little temporary lifeline,” Ketchen said. “You can think about doing your payroll, which should help. This money will also provide a jerk to the economy, as companies provide the money to employees, who in turn will spend it on food and basic necessities, boosting an economy brought to its knees by the protection needs of pandemic, he said.
Part two is relief for existing SBA loan holders from a $ 17 billion fund, which is supposed to cover six months of payments.
The bulk of the package is $ 350 billion in new forgivable loans, with available loans of up to $ 10 million per company, depending on how much the company paid its employees between Jan. 1. and February 29. The loans will carry a higher rate of interest. at 4 percent.
According to Market surveillance, the Small Business Administration will oversee the Paycheck Protection Program to distribute money that can be partially forgiven if businesses meet certain requirements. The loans will be available for businesses with 500 or fewer employees.
The package allows banks to lend directly to businesses with SBA-guaranteed loans.
If the business uses the loan funds for the approved purposes and maintains the average size of its full-time workforce based on when it received the loan, the business will only have to repay the interest. ran.
According to The New York Times, businesses would not have to reimburse the portions that were spent to pay employees, a mortgage, rent or utilities. Approval is expected to take around two weeks. Business owners will also not have to provide personal guarantees or use all of their available assets as collateral.
Businesses that recently laid off workers would be required to repay more of their loans, and loans covering wages over $ 100,000 a year would not be eligible for forgiveness.
Ketchen said the effectiveness of the package will be evident depending on how long the coronavirus measures take.
“If economic activity picked up by the end of May, I imagine this program will have saved thousands and thousands of small businesses,” he said. “If this extends into the second half of the year, no amount of money is likely to save these people.”