RALEIGH – If your small business has applied for but not yet received a loan through the Small Business Association’s Paycheck Protection Plan, you may soon be out of luck. The funding is running out.
Fast.
But don’t give up hope. More cash may be coming, and a new program from the Federal Reserve could help as well.
So warns Peter Gwaltney, Chief Executive Officer of the North Carolina Bankers Association.
“Funding is expected to run out Wednesday, according to the current rate of approvals,” Gwaltney told WRAL TechWire Monday evening.
“As of noon [Monday] 4,500 lenders have received SBA approval for 900,000 loans totaling $220 billion, according to the SBA.”
The Associated Press noted that the “flow of money” through the coronavirus relief plan “is picking up momentum although many company owners are still waiting and wondering.” Loans are available up to $10 million at an interest rate of 1% carry the promise of forgiveness if the money is used for retaining staffers or rehiring those who have been laid off. The funds also can be used for rent, mortgage interest and utilities, The AP notes.
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The program is capped at $349 billion. But that could change.
“Congress is debating legislation to approve another $250 billion for the program,” Gwaltney noted. But quick approval for that capital infusion was delayed by Congressional wrangling last week.
As for the current program, Gwaltney said North Carolina banks “are still processing all day and into the night to process the loan applications they’ve received.” He had predicted that the loan program would trigger “extraordinary” demand on NC banks that could prove to be “overwhelming.”
The group is “surveying our members this week for NC PPP statistics.” In an earlier discussion, Gwaltney noted that several NC banks had made successful loans. But there remain obstacles beyond the run on capital.
“North Carolina banks are doing their best with the limited guidance they’ve received from the Treasury and the SBA,” he said.
The SBA also is offering emergency loans under a plan that moved ahead when the Trimp Administration approved a federal disaster request from NC Governor Roy Cooper.
Fed Reserve plan coming
The Federal Reserve last week announced a “Main Street Lending Program” as part of a new, massive effort to bolster the economy. Gwaltney is hopeful of the benefits the plan could offer, but he says banks are still waiting for details.
“The program is very different than the Paycheck Protection Program and is designed for larger businesses, with a minimum loan amount of $1 million and a maximum loan amount of no more than four times EBITDA [earnings before interest, tax, depreciation and amortization],” Gwaltney explained. “Businesses that have received PPP loans are eligible for loans through the Main Street Program.
“Loans made through the Main Street Program are 95% guaranteed and payments are deferred for the first year of the loan. Guidance for banks is expected from the Federal Reserve later this week.”
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