Today is the day that the Paycheck Protection Program (PPP) was supposed to go in effect, where small businesses owners could finally apply for desperately needed loans. But unfortunately for the millions of struggling small businesses out there the roll out has been anything but smooth.
Let me preface this by saying this is a very dynamic situation and I realize this article may be out of date by the time you read it. But I felt it was important to get this message out here now anyway.
We started hearing late yesterday that there were problems with launching today. NBC reported that Chase, the largest bank in the country, “will most likely not be able to start accepting applications on Friday, April 3rd, as we had hoped.” The problem being that guidance from the SBA and Treasury was still unclear. That guidance did come in the form of a 31-page document released around 7pm ET last night. This was too late for most banks to be ready to go first thing this morning.
We also heard late yesterday from Treasury Secretary Mnuchin who announced that the interest rate on these loans would increase from 0.5% to 1%. The 0.5% interest rate was a big stumbling block for many banks and fintech lenders who said they would be losing money on PPP loans. I am not sure if bumping it 50 bps will make a huge difference but it can’t hurt. It won’t make much of a difference for small businesses because the vast majority of these loans will be forgiven as they spend the proceeds on payroll, rent and utilities.
This whole process has been a bit of a cluster. This Wall Street Journal article yesterday has a good summary as to why more lenders had decided not to sign up for the PPP. But to get a handle on what has actually been going on behind the scenes you should read the CEO of Lendio, Brock Blake’s, tweet series from yesterday.