Firms fear small business loan program in coronavirus rescue package will run out of money
- The Treasury Department issued guidelines Tuesday about the $349 billion paycheck protection program, part of the $2 trillion coronavirus rescue package signed into law last week.
- The aim is to make sure small businesses can continue to pay their workers through the pandemic disruptions. Organizations can apply through a loan through a Small Business Administration Lender beginning April 3rd.
- The loans will be forgiven as long as the money is used to keep employees on the payroll and other expenses like rent, utilities and mortgage interest.
Marlin Steel Wire Products is busy making wire racks for covid-19 test kits. Still, the company is going to pursue a paycheck protection loan because of concerns clients will stop paying their bills or slow buying because they are strapped during the coronavirus pandemic.
"I never want anything bad to happen to my awesome employees. So for that reason, we're going to take the conservative approach, we want to protect our people," said Drew Greenblatt, CEO of Marlin Steel.
The Treasury Department issued guidelines Tuesday about the $349 billion paycheck protection program, part of the $2 trillion coronavirus rescue package signed into law last week. The aim is to make sure small businesses can continue to pay their workers through the pandemic disruptions.
Organizations can apply for a loan through a Small Business Administration Lender beginning April 3rd. The loans will be forgiven as long as the money is used to keep employees on the payroll and other expenses like rent, utilities and mortgage interest.
Smith & Richardson is a specialty parts maker based outside Chicago. The company has been putting in overtime making parts for ventilators, and the commercial aviation and transportation industries. Even though business is keeping his team of 53 busy now, his accountant advised him to consider applying for the new loans.
"We don't need to but you know the way that was written, the Payroll Protection Program, we'd kind of be foolish not to," said Smith & Richardson CEO Richard Hoster, "It's almost free money."
The way the law is written, if a business continues to pay employees for two months, the loan will be forgiven. A company must make a "good faith certification" that the uncertainty of current economic condition makes the loan request necessary to support on-going operations.
There is plenty of uncertainty around Smith & Richardson's business. The commercial aerospace sector has been crushed and the economic slowdown across the board makes it unclear what will happen down the road.
Non-profits are also eligible for the loans and worried about the future. Tech Impact, which provides technology, education and training to other non-profits and employs 75 people is evaluating the paycheck protection program. "There's a lot of fear out there that the money is going to dry up in a matter of days. It's an unknown," said Tech Impact CFO Barry Hartzburg.
The money running out is a real fear and has politicians already discussing a fourth rescue package. Treasury Secretary Steven Mnuchin told CNBC he will ask Congress for more money to sustain the program if the money runs out.
Greenblatt says his loan officer has fifty four accounts in Maryland, and expects to lend over $100 million in the next week.
"Three hundred and fifty billion dollars is going to be sucked up in a matter of days, and there's going to be a lot of people without any money," Greenblatt predicts.