The coronavirus small business loan program: What you need to know

• Danielle Kurtzleben/NPR
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Starting today, small businesses can apply for the nearly $350 billion in loans available through the economic rescue plan from Congress.

The loan program, known as the Paycheck Protection Program, is intended to support businesses so they can ride out the tough economic times and, most importantly, assist with either keeping current workers or rehire those who were laid off.

It’s sorely needed salve for all sorts of small establishments nationwide. Half of small businesses have less than 27 days’ worth of financial cushion, according to one 2016 report, and many have already suffered weeks of low or no income.

Below are some basics on how the program will work and what business owners can expect.

How much money can small businesses get?

They can get up to 2.5 times their total monthly payroll (with a maximum of $10 million). Importantly, as many businesses have already slashed jobs, companies will rely on payroll numbers from before the crisis. The Small Business Administration has set an interest rate of 1% on the loans, and repayment will be deferred for six months.

Congress has appropriated $349 billion toward this program. That may not be enough to meet demand, but it is possible Congress will decide to put more funds toward this program. (Read on to find out more about this.)

Who is eligible?

A lot of businesses — those with fewer than 500 employees, including sole proprietorships and freelancers, as well as nonprofits.

The application requires much less information than a typical small business loan. A sample form put out by the SBA ahead of the program showed there were just two pages of questions on basic information, like payroll size and what the owner intends to use the money for.

Notably, these loans do not require personal guarantees or collateral, which administration officials are hoping will make for a speedy approval process.

The program is currently set to run through June 30.

Some banks won’t be ready immediately

Right now, around 1,800 banks are part of the SBA’s primary lending program. A senior administration official this week said thousands of additional financial institutions could also lend through this program.

But some won’t be ready on Friday. As of Thursday night, JPMorgan Chase’s website said it will “most likely not be able to start accepting applications on Friday.”

Reuters also reported this week that some major banks have been considering not participating in the program. That’s because they would be expected to hand out loans quickly — within days — which could open them up to legal risk.

In addition, some banks initially said that they might not want to participate because of unattractive loan terms laid out by the SBA. The Independent Community Bankers of America sent a letter this week to SBA Administrator Jovita Carranza and Treasury Secretary Steven Mnuchin laying out its concerns, one of which was the low 0.5% interest rate initially set by the SBA, even though the act said interest rates could be as high as 4%.

“Community bank lenders cannot ‘break even’ with such a low rate of interest, and for many it will not be economic or feasible to participate in the program,” wrote ICBA CEO and President Rebeca Romero Rainey.

At a Thursday White House press briefing, Mnuchin said the interest rates would now be set at 1%, citing some small banks’ concerns.

Can businesses really get money in one day?

Here’s what we do know: Friday is when the program opens. Administration officials have said they’re hopeful that businesses will be able to apply for and get their money within the same day. Whether that is feasible will quickly become clear once things get rolling. One day is a much quicker timeline than for standard SBA loans, which usually take five to 10 days to process.

In addition, some banks may not be ready to lend right away on Friday.

“This is an entirely new program, and that’s something that both banks and customers will have to get used to,” said James Ballentine, executive vice president of congressional relations and political affairs at the American Bankers Association. “There will be some banks that will be ready to go, and there will be others that will still learn how to do this and still be working on this for a few days.”

He added that the process may be quicker for businesses with strong ties to their banks already.

“Those customers that have these relationships with their banks, the banks have a lot of their information on file already, so some of those loans will be easier to turn around,” he said. “Others that may not have a banking relationship with their local bank or national bank. Certainly we’re encouraging them to go into that bank to get those loans and apply for them.”