The coronavirus pandemic has put many small businesses across the country in danger of shutting down permanently. With razor-thin profit margins, companies are struggling to stay afloat as they have been deemed "non-essential" and forced to close by state and local governments trying to slow the spread of COVID-19.
In order to help businesses during this crisis, the federal government created a $350 billion lending program known as the Payroll Protection Program. The program, which is run by the Small Business Association, allows companies to borrow up to 2.5 times their average monthly payroll from the previous year.
The loans will be forgiven if the company uses the money for payroll and rent as long as they do not decrease the number of full-time staff members or reduce wages for their employees.
Small businesses were supposed to be able to apply for the loans starting on Friday (April 3), but many banks are not ready to handle the claims. According to CNBC, banks have not received the finalized guidelines from the Small Business Administration or the U.S. Treasury Department.
"They're not ready at all, they're desperately awaiting guidance on how to do this," said Ami Kassar, CEO of small business loan advisory firm MultiFunding. "I think it's going to be a mess for weeks."
On Thursday, JPMorgan Chase, the largest U.S. bank, sent an email to customers admitting that they "will most likely not be able to start accepting applications."
Late Thursday night, banks received a 31-page "Interim Final Rule," which detailed how the program will work, giving them little time to prepare for the millions of applications they expect to receive.
"It's remarkable to me in my 15 years swimming around the legal world … to see an implementing program that [is] regulatory-driven without any regulations. It's been really a bizarre experience," Carrie Cherveny, SVP of strategic client solutions for global insurance brokerage Hub International's Risk Services Division, told Fortune.
To keep up to date on the latest news about the coronavirus and to understand what you need to stay safe and healthy, check out the Coronavirus: Fact vs. Fiction podcast from CNN Chief Medical Correspondent Dr. Sanjay Gupta.
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