The bailout programme for small and mid-sized United States businesses – which was created by the administration of US President Donald Trump and which aims to keep companies that employ 60 million Americans afloat despite widespread shutdowns related to the new coronavirus – launched on Friday.
So far, things are off to a rocky start, even as top administration officials boasted about the kick-off.
Treasury Secretary Steven Mnuchin tweeted his congratulations to the Small Business Administration (SBA) and Treasury early Friday morning. “I just got first report on #PPPloan The system is up and running. Community banks have already processed over 700 loans processed for $2,500,000. Great work!!” he wrote.
White House economic adviser Larry Kudlow said on Bloomberg TV that banks are “ready to go” with the loan programme.
A number of bankers, however, told Reuters news agency on Friday morning that they were not able to make loans yet because they were waiting for information or processing details from the SBA and Treasury.
Citibank’s website Friday morning featured a message asking customers for patience because of high call volume, and said it was not yet making loans. “While we are working as quickly as we can, we are not yet able to accept applications for the Paycheck Protection Program.”
The programme is intended to give lenders the ability to make fast, low-interest-rate loans to businesses with fewer than 500 employees – a segment that contributes more than 40 percent of US gross domestic product, and employs some 60 million people. The US Treasury will back loans of up to $10m to cover about eight weeks of payroll and some other expenses such as rent and utilities.
It’s a key part of the administration’s plan to keep the US economy from diving into a depression, and is designed to keep people off of unemployment. Millions of applications are expected on Friday.
But lenders have complained in recent days that the Treasury and SBA have not provided clear guidance about their liabilities and responsibilities, or functioning technology to process borrowers.
In addition, the fine print of some bank terms can also prevent individuals from getting the assistance they desperately need at the moment.
For instance, lenders offering 90-day forbearance on mortgage payments are limited in how they can structure help for customers whose loans are owned by investors.
Mortgage-bond holders are still requiring monthly payments even if borrowers do not pay. Banks have been willing to foot the bill for a few months, but will ultimately need cooperation from investors.
Some customers are finding they are expected to write a big cheque as soon as the grace period ends, rather than having missed payments tacked onto the end of the loan.
Nearly 10 million Americans have already filed jobless claims. Some economists expect the unemployment rate eventually to spike as high as 12 percent in the coming months and second-quarter US economic output to fall as much as 40 percent from a year earlier.