The US Federal Reserve, the central bank of the US, will establish a facility to facilitate lending to small businesses via the Small Business Administration’s Paycheck Protection Program (PPP) by providing term financing backed by PPP loans. The news was distributed in a very brief release.
The Fed said that additional details will be announced this week.
The PPP is core to the CARES Act, the COVID-19 bailout package that supports US SMEs. Under the plan, borrowers make gain access to a loan that is 2.5 times weekly payroll. Requirements are that companies applying for the loan must maintain payroll during the required period. If an SME maintains payroll by not letting any employees go, the loans are 100% forgivable.
The program officially opened last Friday and has endured a certain amount of criticism due to confusion regarding the package. US Secretary of the Treasury Steven Mnuchin has stated that, if necessary, more money will be approved by Congress. Currently, the CARES Act has allocated $349 billion as part of the PPP out of a $2 trillion bailout for business.