As part of the federal government’s sweeping $2 trillion stimulus package, Congress has pledged nearly $350 billion in partially forgivable loans to small businesses. Though there’s still some uncertainty about the details of the program, bankers are urging companies to get their application materials in order as soon as possible.
Known as the “paycheck protection program,” the loan program is aimed at enabling small businesses to continue paying employees as revenue streams dry up. It could be especially useful for businesses in the hospitality industry, which have been among the hardest hit during the Covid-19 pandemic.
For businesses that have laid off vast portions of their workforce, the program could be an incentive to rehire and keep employees on the payroll, said Bremer Financial Corp. CEO Jeanne Crain.
“We’re always only as good as our workforce,” she said.
Banks will essentially act as “conduits” for the federal loans, which will be administered through the Small Business Administration. The funds will also be available for nonprofits, which usually don’t have access to SBA loans.
The program will provide government-backed loans to cover payroll and other essential expenses, such as mortgage payments, rent, and utilities. Under the terms of the program, the government says it will forgive payroll costs for eight weeks after the loan is given. But companies are required to maintain their standard employee count and compensation levels, according to the U.S. Treasury Department’s briefer on the program.
As the federal government finalizes details, it would be wise to get a rough estimate of average monthly payrolls and rent payments, said David Reiling, CEO of St. Paul-based Sunrise Banks.