April 2, 2020

UPDATE: Not so fast. Turns out there are a lot of problems. Stephanie Ruhle's on the case.

New York Magazine's Eric Levitz is not an easy sell, so if he's pleased with this, we should all be. Via New York Magazine:

According to Levitz, the SBA and the Treasury Department worked to resolve problems with the small business bailout package and they have been successful. And in this CNBC interview, Mnuchin indicated that Congress is already agreed that they will raise the cap on the program when needed. Levitz summarizes:

Who qualifies for a small-business loan? What do I get if I qualify?

First, it’s worth reviewing the (newly confirmed) nuts and bolts of the program: If you are a company, nonprofit, veterans organization, or tribal concern with 500 or fewer employees — or else, a self-employed individual or independent contractor — the government will provide you with a loan equivalent to eight weeks of your prior average payroll (or, for the self-employed, earnings), plus an additional 25 percent of that sum (unless that grand total adds up to more than $10 million, which is the cap for any individual firm). You do not need to make any payments on that loan for six months. And if you maintain your workforce, then the government will entirely forgive the portion of the loan spent on payroll, benefits, utilities, rent, mortgage payments, or other debts. In other words, it will forgive more or less all of it. The policy isn’t actually intended as a loan program so much as a payroll-support policy akin to those adopted in Denmark and the United Kingdom. It’s structured as a loan program primarily because America’s private-banking infrastructure is more robust than its state capacity, and so having private banks issue government-guaranteed loans is a quicker way of getting money out the door.

How do I apply for the loan?

Which brings us to the first critical clarification in Tuesday’s guidance: Small businesses don’t need to work through the SBA or its affiliated lenders to secure loans, but, rather, can apply for them at most any “federally insured depository institution, federally insured credit union, and Farm Credit System institution.” In other words, an eligible business owner should be able to walk into just about any FDIC bank and secure enough capital to cover payroll for two months. This will ostensibly allow firms to get the money they need to survive posthaste.

Will this loan help workers who were already laid off?

The guidance also goes a way toward resolving concerns about already fired workers. The new rules (1) require businesses to spend 75 percent of their loans on payroll in order to qualify for forgiveness, and (2) clarify that firms that have already done layoffs can secure forgiveness by “quickly” rehiring laid-off workers. Taken together, this provides a powerful incentive for businesses to bring staff back on, since (essentially) any money you save by lowering your monthly payroll costs will just end up going to the government.

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