Payroll protection: Banks expecting high demand for small-business loans
Money allows small businesses to pay workers for eight weeks
A mad dash for $369 billion in paycheck protection funding for small businesses starts Friday as banks can begin accepting applications for enhanced loan funding made available through the federal CARES Act.
The Paycheck Protection Program allows small-business owners to apply for up to $10 million to keep employees on the payroll for eight weeks — or rehire recently laid off employees, said John
Garcia, New Mexico district director of the Small Business Administration.
The loans, which are potentially forgivable, are essentially first-come, first-serve with some 30 million small businesses in the U.S. and 157,000 in New Mexico eligible to apply.
“I swear we’re getting calls from every one of them,” Garcia said about New Mexico small businesses. “We know a tsunami of calls is coming to us and lenders. We get 500 calls a day.”
This applies to a vast majority of New Mexico businesses, as small business is defined as up to 500 employees.
The loan amount is determined by a company’s average monthly salaries times 2.5, Garcia said.
“The loan is for job retention to provide eight weeks’ payroll and other operational costs,” Garcia said. “The loan is forgiven as long as employees are on the payroll.”
The loan can be used for payroll, rent, mortgage interest and utilities, according to the Small Business Administration website. The program is available through June 30.
Closed business can apply for loans to pay employees even if they are not working.
“I think it’s going to be an essential lifeline to businesses around the state,” said Rob Black, CEO of the New Mexico Association of Commerce and Industry,
the statewide chamber of commerce and business advocate. “If this wasn’t there, the economic devastation would be dramatic. The fact is, [this is] a loan that can become a grant. It creates a good incentive to keep people on the payroll.”
Businesses can be reimbursed through the program for payroll retroactive to Feb. 15, Garcia said. Small businesses apply at banks and credit unions for these loans.
New Mexico small businesses can also apply for Economic Injury Disaster loans of up to $2 million with the first payment deferred for 12 months. Businesses that take out this loan cannot use the Paycheck Protection Program, according to the SBA. The federal Coronavirus Aid, Relief and Economic Security Act, or CARES, has numerous other provisions that are still being sorted out.
“There are quite a few things in the CARES Act we need to make sure businesses take advantage of,” Black said, adding he will work chambers of commerce across the state to make sure business owners are aware of all the aid programs.