The historic $2 trillion emergency relief bill approved by the U.S. Senate includes a $350 billion loan program aimed at helping small businesses weather the economic storm from the coronavirus.
CNBC said the Paycheck Protection Program could be a “potential lifeline” for small businesses though an official at the National Federation of Independent Business said the relief may have been delayed too long.
“We are cautiously optimistic that this will provide the cash flow that small businesses needed yesterday,” said Kevin Kuhlman, senior director of federal government relations for the federation. “But we’re worried it may be too little too late.”
The Paycheck Protection Program, which will be overseen by the Small Business Administration, is available to businesses with fewer than 500 employees, including sole proprietors, independent contractors and anyone otherwise self-employed. Loans will be administered by banks and can be used to meet payroll and cover certain other expenses like utilities or insurance premiums.
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 principal of the loan will be forgiven, meaning the company will only need to pay back the interest accrued.
Any amount not forgiven would have a maximum interest rate of 4%.
“They are going to be able to take an SBA loan that will give them two months of payroll and some overhead,” Treasury Secretary Steven Mnuchin said. “And if they hire the workers back or they keep their workers hired, the government will forgive that loan.”
The House is expected to approve the relief package, called the Coronavirus Aid, Relief and Economic Security Act, on Friday. While the legislation would go into effect once President Donald Trump signs it, there may some lag time before the small business loan program is available.
“We hope it can be up and running in a week instead of months from now, which would be too late,” Kuhlman told CNBC.
The legislation also includes a $500 billion, taxpayer-funded liquidity pool for businesses, states and municipalities damaged by the coronavirus crisis.