U.S. Doubles Small-Business Loans’ Rate to 1% After Lenders Balk

The Small Business Administration (SBA) increased the Paycheck Protection Program  interest rate to 1% on Thursday so lenders would be more incentivized to put cash into the hands of business owners. 

U.S. Treasury Secretary Steven Mnuchin and the SBA released updated guidelines for the program before it goes wide on Friday, according to Bloomberg. Banks and other lenders complained they lacked the necessary instruction on how to complete the loans, including what documentation is required.

The Paycheck Protection Program lets small businesses apply for up to $10 million from SBA associated lenders, with payments deferred for six months. Employers can use the funds to cover the costs of salaries, bonuses, retirement benefits, parental leave and health care benefits. Loans could be forgiven for the first eight weeks if employers pay their expenses and keep salary levels constant. Three-quarters of the loan must go toward payroll.

The government indicated that funds would be available to employers on the same day that they apply. However, lenders have criticized the program, saying it isn’t possible to process the loans as quickly as the government expects without having more guidance.