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Confusion over PPP eases as Fed Reserve backs loans

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April 7, 2020

With many businesses in the ATM industry racing to apply for funding through the Small Business Administration’s emergency loan program as their bills come due, the Fed government released a statement on Monday committing to backstop the emergency loan program. The $350 billion Paycheck Protection Program, that was signed into law two weeks ago to help businesses impacted by the coronavirus, has already received pushback from banks and businesses alike concerning complications in applying and disbursing funds, according to an article on Yahoo Finance

The loans that were authorized by the CARES Act originally gave a fixed interest rate of 0.5% and a deferment of payments for up to six months. Community banks argued that the 0.5% rate was well below a rate for lenders to even consider participating. Instead, in a letter from Independent Community Bankers of America to policymakers, a rate closer to 4% was requested. An agreement between the U.S. Treasury and the SBA ultimately set a rate of 1.00%

The financing concerns around the PPP added an extra layer of frustration over an emergency effort already suffering from issues in just launching the program. On April 3, the first day banks were to receive loan applications from businesses requesting PPP loans, websites crashed, and banks were overwhelmed by the number of applications. Complaints rushed in as several small businesses claimed their application was labeled "ineligible" despite years of banking with a particular financial institution.  

The Federal Reserve agreed to establish a facility to provide term financing backed by PPP loans and will release additional details as they become available.

For more information on how the coronavirus is affecting the ATM industry click here