WASHINGTON—The Treasury Department and Small Business Administration have released information for the $349 billion paycheck protection program included in the Phase 3 coronavirus relief package, also known as the CARES Act. NAFCU is calling on the SBA to now provide greater clarity.
Small businesses may begin applying for paycheck protection loans Friday; independent contractors, self-employed individuals, and sole proprietors can begin applying April 10. The maximum loan amount is $10 million, with an interest rate of 0.5%, first payment deferred for six months, and maturity of two years. Additional information on the loan terms and conditions is available here.
The CARES Act directed the Treasury Department to work with the SBA to quickly establish criteria for "insured credit unions" allowed to participate in the program, NAFCU noted
According to the paycheck protection program's information sheet for lenders, "[a]ll federally insured depository institutions, federally insured credit unions, and Farm Credit System institutions are eligible to participate in this program."
Institutions that are currently SBA-approved lenders "will be given delegated authority to speedily process" loans under the paycheck protection program, "[a] broad set of additional lenders can begin making loans as soon as they are approved and enrolled in the program. New lenders will need to submit their application to DelegatedAuthority@sba.gov to apply with the SBA," the agency said.
The SBA said its goal "is to position lenders as the single point-of-contact for small businesses – the application, loan processing, and disbursement of funds will all be administered at the community level." Loans will be available retroactive from Feb. 15, 2020 so employers can rehire their recently laid-off employees through June 30, 2020.
NAFCU Calls for Guidance
The loans are guaranteed by the SBA and related fees will be waived. Additional information on underwriting requirements, lender compensation, agent compensation, and ability to sell in the secondary market is available in the fact sheet.
In addition to the lender fact sheet, there is one for borrowers and a borrower application. A topline overview of the program is also available; additional information for the paycheck protection program and other coronavirus-related small business assistance can be found on the SBA's website. The Treasury Department also has more information on its coronavirus-related efforts available here.
NAFCU is calling on the SBA to clarify eligibility for loans under the new paycheck protection program created by the CARES Act for federally-insured credit unions as they – just like other small businesses – "are facing difficult staffing and payroll decisions" in the wake of the coronavirus, the trade gropu said.
In a letter to SBA Administrator Jovita Carranza, NAFCU President and CEO Dan Berger thanked the agency for its efforts "to ensure that our nation's small businesses can obtain capital and continue paying their employees during this time of hardship." Berger noted "a majority of FICUs themselves qualify as 'small businesses' as defined by the SBA industry-based size standards."
Berger said it was Congress' intent with the CARES Act to assist all small businesses, including not-for-profits such as credit unions, and the SBA should clarify that eligible recipients under the paycheck protection program include FICUs.
In addition to Berger's letter, NAFCU joined with more than a dozen other trade groups to further bolster its request that cooperative businesses be allowed to participate in the paycheck protection program.
"The harsh economic consequences of COVID-19 do not discriminate by business structure," the groups wrote. "There are more than 65,000 cooperative businesses in the United States facing the same economic hardships as other business models. Collectively, cooperatives generate more than $75 billion in annual wages. It is imperative that cooperative businesses are treated equally with other business structures and able to access the [paycheck protection program]."