A new small business, zero-collateral loan program could help keep some school bus contractors and other industry companies afloat during interruptions in service and payment from customers resulting from the COVID-19 crisis.
President Donald Trump announced the Small Business Paycheck Protection Program during a White House press conference on Tuesday. All businesses with 500 employees or less are eligible, unless the meet Small Business Administration size standards.
The U.S. Treasury Department and Small Business Administration released a fact sheet that describes the $349 billion program, which begins on Friday for most organizations. Independent contractors and sole proprietorships can begin applying on April 10.
Loans are fully forgiven if at least 75 percent of the funds are used for eight weeks of employee payroll costs, which are capped at annual salaries of $100,000 per employee and at $10 million per company. Companies can also utilize loans to pay interest on mortgages, rent, and utilities over the same eight-week period.
When used for other purposes, the federal government is deferring loan payments for six months at a fixed rate of 0.5 percent over the next two years.
“No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees,” the fact sheet states.
The Treasury Department explained that loan forgiveness also hinges on companies keeping employees on the payroll or rehiring quickly, while also maintaining salary levels. Loan forgiveness will be reduced if companies reduce their employee headcount, or they decrease salaries and wages.
Companies can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and participating Farm Credit System institution.
“Other regulated lenders will be available to make these loans once they are
approved and enrolled in the program,” the fact sheet reads. “You should consult with your local lender as to whether it is participating. All loans will have the same terms regardless of lender or borrower.”
A list of participating lenders and additional program information is available at www.sba.gov.
The application deadline is June 30.
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