As the Paycheck Protection Program (a provision under the federal economic stimulus plan that sets aside $349 billion in rescue loans for small businesses) gets underway following a chaotic launch, banks are already reporting surging demand from businesses struggling to stay afloat during the coronavirus crisis. The latest:
- CNBC reports that Bank of America has seen applications from 177,000 small businesses that account for $32.6 billion—almost 10% of the entire amount allocated by Congress. (This number accounts for applications received, not loans approved by the SBA).
- Wells Fargo says it will focus its lending on nonprofits and small businesses with fewer than 50 employees (though the Paycheck Protection Program as a whole includes companies with fewer than 500 employees), citing Fed restrictions on its balance sheet capacity; the bank says it has already enough applications to that exceed its capacity of $10 billion to lend.
- “We are committed to helping our customers during these unprecedented and challenging times, but are restricted in our ability to serve as many customers as we would like under the PPP,” Wells Fargo CEO Charlie Scharf said in a statement.
- Over the weekend, Senator Marco Rubio tweeted that based on current demand, money in the program could run out by June 6th.
- Last week, Bank of America received 10,000 applications for loans within the first hour its portal was open, CEO Brian Moynihan told CNBC. The bank has been criticized for restricting applications to customers who already borrow from the bank, which excludes those customers who have checking accounts but not loans.
The Small Business Administration’s Paycheck Protection Program is a key part of the economic stimulus package that allocates $349 billion for small businesses to access forgivable loans for payroll and overhead. The program will offer loans of up to $10 million at 1% interest to companies and nonprofits with fewer than 500 workers so they can cover two months of payroll and overhead expenses. If the borrower retains workers and doesn’t cut their wages, the government will forgive most or all of the loan and repay bank lenders.