HOLD ON SMALL BUSINESSES. The Cavalry is on the way!

Today (Thursday April 9th) Federal Reserve Chairman Jerome Powell shared that the government has set up new loan programs and reinforced existing ones by approving $2.3 trillion in funding and lending support for businesses and the economy. Basically, the U.S. Treasury Department is providing much needed support by using the central bank’s powers to fight emergencies. The key to this new action by the Fed is a new $600 billion “Main Street Lending Fund” that will provide support for small and mid-sized businesses who will only have to pay between 2.5% to 4% interest above the secured overnight funding rate (that rate is current at 0.0%). The plan is to offer 4 -year loans to companies, with principal and interest payments deferred for one year. These loans will be originated by banks.

Furthermore, Treasury Secretary Steven Mnuchin and Senate Majority Leader Mitch McConnell are pounding the table for Congress to approve a $250 billion injection into the Payroll Protection Program (PPP) for more small business aid, which would bring the total amount available to $600 billion. Additionally, banks are starting to figure out the PPP underwriting process.  Bankers have historically put loan applications under a microscope, however that level of scrutiny is not required by the SBA guidelines for PPP loans. That message is finally being received by lenders and as a result the flow of PPP loan approvals should improve moving forward (especially when there is additional funding added).  So, if your business has not yet been approved for a PPP loan, don’t despair.  There appears to be more money on the way!

The Trump Administration has repeatedly stated that these efforts are all about keeping small businesses open and workers employed. The actions taken today by the Fed seem to be in lock step with the President’s goals. In fact, the President feels that there is a real possibility that part of the economy will be reopened during May.

Lastly, there is a lot of positive information coming out from the scientific and medical community regarding Coronavirus treatments and vaccine development initiatives. Growth in new cases has slowed or even turned negative across the world and within the U.S.  The expectation is that one of the treatments could be approved within the next 3-5 months; however, we may be a year or more away from a vaccine being developed.

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