I just wish they could have done it at a much lower interest rate, Near 0 really.
I would assume, even at 3.75%, they are going to lose money (i.e., subsidize this) because a non-trivial number of borrowers will eventually default. But even at 3.75%, the interest is not a lot, e.g., $100,000 loan, that a little over $300 in interest per month.
The bigger unknowns is what they will actually approve the loan for.
Jay you should look into the paycheck protection program. It is easier to apply for and will, essentially, turn into grant money if utilized within 8 weeks of issuance for expenses such as payroll, payroll taxes, workers compensation premiums, contract employees, medical premiums, utilities, and mortgage interest.
It is a bit of paperwork but provides two full months of funding for the above and does not need to be paid back if utilized properly (essentially, free money). Catch is that the company cannot lay-off or furlough employees.
If the money is not used for the above it simple reverts to a low interest loan.
SBA Loan qualification is pretty simple. There are a few requirements that you must meet, such as operating your business within the United States and not having any existing debt obligations to the government. Surprisingly, it's not nearly as strict to qualify for SBA Loans as one would think.
I beleive thats a different loan program than what i was referring to then. The one i was referring to is the CARES stimulus act where they give you a loan based off of 2.5 months of payroll and as long as you use those funds for payroll and you can prove that you use those funds for payroll, the government will forgive 8 weeks of the payroll costs. Meaning they give you free money to make 8 weeks of payroll. So far i havent seen any disqualifiers. You can also use some of it for rent payment and utilities which the govt also forgives.
We had a webinar yesterday by the Virginia SBA association. One question they couldn't answer was - if the proposed grant/forgiveness that Congress is working on, for paying employees to stay on the payroll instead of laying them off, can be applied to one of these SBA loans.
They also said you don't have to take the money once approved which allows you to apply now and if things are better at the time of approval you can just not take it
My issue, especially for small business is that you have to repay the loan. Those businesses that may need it the most are the least capable of repaying it. The economic impact of this mess will far outstrip the health aspect.
That sounds weird to read aloud... The terms are very favorable and the benefit is for the money to be available. Credit requirements are very low. Not sure how you can justify the citizens paying for every integrator to stay in business.
I didn't say I think the citizens should pay to keep people in business. I'm not for bailing out auto, air or anyone else. My point is that if they have to pay it back, it may still not help some businesses that run tight in the long run, just delay their demise. And, the Citizens (all of us working 50+ hours a week trying to get ahead) will get stuck holding the financial bag as usual. This won't be good.