Louisiana business leaders are closely following a provision of the anticipated $2 trillion stimulus package that would distribute $367 billion in loans to small businesses—which, provided certain terms, business owners likely won’t have to pay back to the federal government.
Specifics of the loan program have yet to be released. But it’s understood that banks designated as 7(a) lenders would be able to loan the SBA money directly to their small business customers, who can also apply through the program through those lenders rather than through the swamped SBA. Also, the government would forgive loans taken out by small businesses and 501(c)3 nonprofits, treating them like grants, as long as business owners prove those dollars went exclusively toward employee payroll, mortgage, rent and utilities for payments made between March 1 and June 30.
Because of these factors and the fact that the massive bill—on which U.S. lawmakers and the Trump administration have reached a preliminary agreement—could be signed into law later today, small businesses that need loan assistance should get in line early, according to LABI President and CEO Stephen Waguespack.
“This is the lifeline Louisiana’s small businesses have been looking for all week,” Waguespack says. “Small businesses need to get in touch with their local lending institutions, find out if they’re a 7(a) lender and apply through them once the funds become available.”
Should it pass today, the provision would come at an ideal time for small businesses, many of which have been forced to shut down until at least April 13 and aren’t expecting to receive any income during that time. Further pressuring cash-strapped small businesses is another $100 billion package Congress quickly passed last week, mandating they pay sick leave for their employees. Waguespack says the anticipated loan program marks an “innovative approach” those business owners could take to stay financially afloat and in compliance with the requirement.
The SBA loan program has traditionally been a cumbersome, slow and unappealing process for business owners, with the maximum amount on economic disaster injury loans currently capped at just $2 million.
However, by putting banks on the front lines for assistance, this loan program would ideally expedite the process for small businesses, says Baton Rouge Area Chamber President and CEO Adam Knapp, noting speed of service has been the greatest concern among the businesses BRAC represents.
“The SBA has been saying now that in an optimum time frame, you’d see funds within 20 days of approval of your application, yet we’ve experienced much longer periods with the SBA after disasters,” Knapp says. “Banks are much faster at getting capital out into the economy.”
Knapp says he’s heard maximum loan amounts could be as high as $10 million, but isn’t yet aware of what interest rates would be on the loans.
The bill would also include an expansion of unemployment benefits to nontraditional employees like gig workers and freelancers, and it would bump up current unemployment assistance by $600 a week for four months.