Today is the day that small businesses can start to apply to their local banks for corona virus inspired SBA-backed Paycheck Protection loans that can ultimately be forgiven if the employer meets certain goals.
But the Wall Street Journal notes that many financial institutions, both the money center banks and the local lenders, still are unsure of the process.
Wells Fargo said that they will loan to existing customers only and small banks don’t seem to know what paperwork will be required. Others aren’t sure of how much due diligence on borrowers must be documented and whether they will be able to sell the loans into the secondary market. Bank of America just said that they will be the first bank to accept applications.
Since the loans will bear an interest rate of 1% (up from the originally mandated 0.5%), it’s possible that they may not make the effort break even for the banks creating a non-incentive to make the loans.
From what I’m hearing from the local business community, these loans are life-or-death for many small entities, so the government and banks have to make this work.