As many companies in the ATM industry rush to apply for funding through the Small Business Administration’s emergency loan program when their bills come due, the Fed government has released a declaration Monday, pledging to support the emergency loan program. The $ 350 billion paycheck protection program, which was enacted two weeks ago to help businesses affected by the coronavirus, has already been pushed back by banks and businesses over application complications. and the disbursement of funds, according to an article on Yahoo Finance
The loans authorized by the CARES Act originally provided for a fixed interest rate of 0.5% and deferral of payments for up to six months. Community banks argued that the 0.5% rate was much lower than a rate that lenders could even consider participating in. Instead, in a letter from America’s independent community bankers to policymakers, a rate closer to 4% has been requested. Agreement between the US Treasury and the SBA finally fixed a rate of 1.00%
Funding issues around the PPP added an extra layer of frustration with an emergency effort that was already suffering problems when the program was launched alone. On April 3, the first day banks were due to receive loan applications from businesses applying for PPP loans, websites collapsed and banks were overwhelmed with the number of applications. Complaints sprang up as several small businesses claimed their application had been labeled “ineligible” despite years of banking service with a particular financial institution.
The Federal Reserve has agreed to establish a facility to provide term financing backed by PPP loans and will release further details as they become available.
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