Banks wait for more guidance for ‘Paycheck Protection’ loans

COLUMBIA, Mo. (KMIZ)

A local community bank says it's ready to start lending money that employers can use to pay workers under a new federal program -- once it gets some more information.

The federal Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, has several programs that assist businesses and nonprofits impacted by COVID-19.

Federal agencies are still developing some of these programs, but small business owners should see more become available soon. 

Central Bank of Boone County has been following the CARES Act since Friday, when the application period began for the Paycheck Protection loans. 

Jaime Palmer, a Central Bank commercial loan officer, said the Paycheck Protection Program loan is the only loan implemented at the bank level. 

Palmer said Paycheck Protection Program loans take a borrower's average monthly payroll as a base for the loan amount. The loans can be used not only for payroll but also for borrowers' utilities, rent and interest on debt.

Palmer said Central Bank is monitoring the written guidance and official interpretations that have been issued slowly by the Small Business Administration and Treasury Department.

“They issued some guidance known as the interim final rule,” Palmer said. “And that guidance, of course, provided some clarity, but left many things gray, so we continue to wait as that process is fleshed out more thoroughly for additional pieces of guidance on particular customer situations.”

Palmer said Central Bank began accepting applications and processing those applications Friday to secure funding for the small business and nonprofit community, but they are still waiting for more guidance from the SBA.

“One of those areas is on the closing documentation requirements,” Palmer said. “And we hope that'll be something that's finalized soon.”

However, in order to close a loan, typically a bank needs a promissory note for the client to sign and some other documents. Palmer said the SBA is currently working to revise its promissory note.

“We do hope to begin closing loans as early as next week,” Palmer said. “But we're truly at the mercy of the SBA on issuing its final guidance on those closing documents before we can begin that closing and funding to the client process.”

Palmer said a timeline for the closing process is hard to pin down without having the closing document requirements established, but she thinks loans can go out quickly thereafter.

“The importance of getting these funds out there to the community is high," Palmer said. “So we just have to be a little patient here in the next few days and weeks, as they firm up the details so that we can quickly get money into the hands of our business and nonprofit community.”

Palmer said one of the more attractive pieces of the Paycheck Protection Program is the possibility for forgiveness of up to the full principal amount. 

The loan money can be used beyond eight weeks, but only those first eight weeks are eligible to be reimbursed by the government. As long as 75 percent goes to payroll, the company receiving the loan can apply for full forgiveness of the debt.

Palmer said it's a powerful economic stimulus for small businesses and nonprofits.

Central Bank has seen plenty of interest in the program from its customers, Palmer said.

Other SBA loans are the Economic Injury Disaster Loan, SBA Economic Injury Disaster Advance and SBA Small Business Debt Relief Program.

The SBA Economic Injury Disaster Loans are available to businesses and nonprofits.

It provides small businesses with working capital loans of up to $2 million to help overcome the temporary loss of revenue small businesses are experiencing.

The SBA Economic Injury Disaster Advance allows applicants to apply for a loan advance of up to $10,000. Applicants must apply for an SBA Economic Injury Disaster Loan (EIDL).

These funds will be made available within three days of a successful application, and this loan advance will not have to be repaid.

Lastly, the SBA Small Business Debt Relief Program provides relief to small businesses with non-disaster SBA loans. 

The SBA covers principal and interest on new loans issued prior to September 27, 2020 and current loans for a period of six months.

Stay up to date on this developing story here and on ABC 17 News at 5 p.m. and 6 p.m.