Coronavirus Stimulus Plan: Loans for Small Business

Summary

WSJ Your Money Briefing – "Coronavirus Stimulus Plan: Loans for Small Business"

Date: March 31, 2020
Host: J.R. Whalen
Guest: Amara Omokwe, Wall Street Journal Reporter

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Episode Overview

This episode focuses on the $350 billion in federal loans made available to small businesses as part of the new coronavirus stimulus package. Reporter Amara Omokwe explains the eligibility criteria, application process, loan terms, and the forgiveness provisions of the Paycheck Protection Program (PPP). The goal: help small businesses retain workers and remain afloat during the COVID-19 crisis.

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Key Discussion Points & Insights

1. Background and Purpose of the Small Business Loans

• With nearly 60 million employed by small businesses, many have faced layoffs or closures due to the pandemic.
• The stimulus bill allocates $350 billion to help businesses avoid permanent closure (01:14).

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2. Who Is Eligible? (02:01)

• Any business or nonprofit with fewer than 500 employees (with some exceptions).
• Includes self-employed workers, gig workers, and independent contractors.
• Must have been operational as of February 15, 2020, and paid employee salaries/payroll taxes.

Quote:
"Essentially any business or nonprofit with fewer than 500 employees would be eligible... Also, self employed workers, gig workers, independent contractors would also be eligible."
— Amara Omokwe (02:01)

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3. Loan Amount and Terms (02:33)

• Maximum loan amount: $10 million.
• Interest rate capped at 4%.
• Formula: average monthly payroll × 2.5.
• Adjustments for businesses recently established or unique circumstances (independent contractors).

Quote:
"The maximum amount a business can apply for is $10 million... and lenders are going to be using a formula that looks at a business's estimate, average monthly payroll and multiplying that by two and a half times."
— Amara Omokwe (02:35)

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4. How to Apply (03:39)

• Loans distributed by private lenders, backed by the Small Business Administration (SBA).
• 1,800 SBA-partnered lenders available immediately.
• Goal: expand program to all FDIC-insured and more lenders for wide accessibility.

Quote:
"A business that is interested in this particular program needs to go to a private lender in order to apply... the Small Business Administration says there are about 1,800 lenders across the country that... can issue these loans right away."
— Amara Omokwe (03:42)

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5. How the Program Protects Jobs (04:30)

• Called the "Payroll Protection Program."
• Requires businesses to keep existing workers or rehire those laid off.
• Applicants must certify intent to retain/pay staff.

Quote:
"Lawmakers that worked on this legislation actually called it the Payroll Protection Program... making sure that businesses and nonprofits either keep the workers that they have or rehire workers that they laid off."
— Amara Omokwe (04:34)

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6. Credit Requirement and Accessibility (05:01)

• Credit score not a main factor; focus is on payroll costs instead.
• Goal is rapid, broad distribution—minimal barriers for applicants.

Quote:
"A business's credit profile is really not going to be a factor in whether or not they can get these loans... the main criteria is going to be payroll costs."
— Amara Omokwe (05:01)

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7. Loan Forgiveness (05:32)

• Forgiveness for portions used on payroll, rent, mortgage, utilities.
• Up to 100% forgiveness if all funds cover eligible costs.
• Amount forgiven depends on maintained payroll.

Quote:
"There is a loan forgiveness provision. So businesses who retain or rehire their workers would be eligible for forgiveness on the portions of the loan that are used essentially for overhead costs..."
— Amara Omokwe (05:32)

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8. Possibility of Further Support (06:16)

• Lawmakers view this as a potential first step.
• Treasury Secretary Mnuchin and others open to expanding the program based on its effectiveness.

Quote:
"This could be the first phase of a cycle of loans or a cycle of other programs aimed to help small business owners... lawmakers have already said that they are just basically waiting and seeing..."
— Amara Omokwe (06:19)

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Notable Quotes and Moments

• On Eligibility:
  "The main criteria is that the business or the person needed to have been in operation or working as of February 15, 2020."
  — Amara Omokwe (02:20)

• On Application Process:
  "Treasury Secretary Mnuchin says he essentially wants every FDIC insured institution in the country and additional lenders... to be able to issue these loans."
  — Amara Omokwe (04:07)

• On Loan Forgiveness:
  "If, for instance, a business used the entire loan towards those costs, they would be eligible for 100% forgiveness."
  — Amara Omokwe (05:47)

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Timestamps of Key Segments

• [01:03] Problem Overview & Introduction of Guest
• [02:01] Eligibility Explained
• [02:33] Loan Amount and Calculation
• [03:39] How to Apply: Lenders & SBA
• [04:30] Payroll Protection & Job Retention Requirement
• [05:01] Credit Requirements Minimized
• [05:32] Loan Forgiveness Terms
• [06:16] Possibility of Further Loan Cycles or Funding

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Conclusion

This episode delivers a clear, concise overview of the small business loan section of the coronavirus stimulus package, with key details on eligibility, application, and forgiveness. Amara Omokwe provides practical insights and breaks down the intent and mechanics of the Payroll Protection Program, emphasizing accessibility and job retention as top priorities.

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For more details, visit The Wall Street Journal’s Your Money Briefing podcast or related WSJ coverage on the federal stimulus plan.

Transcript

[Small Business Owner 1]

Access to affordable credit helps me pay my employees, but I don't really need it.

[Small Business Owner 2]

Inflation is killing me, but who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill.

[Small Business Owner 1]

See banks and credit unions help small businesses make payroll. This bill would cut the vital resources

[Small Business Owner 2]

they need while increasing megastore profits. They deserve it, don't they?

[Advocate/Opponent of Durbin Marshall Bill]

Tell Congress, stop the Durbin Marshall money grab for corporate megastores paid for by the Electronic Payments Coalition.

[J.R. Whalen]

Here's your money briefing for Tuesday, March 31st. I'm J.R. whalen for the Wall Street Journal. All this week we're taking a look at different pieces of the new federal stimulus plan for our series $2,000,000,000,000, in youn. Yesterday, we talked about how the relief package provides benefits for retirees and for people still contributing to their 401. Today we look at the nearly $350 billion in loans that are now available for small businesses.

[Amara Omokwe]

In order to get this loan, businesses and nonprofits either keep the workers that they have or rehire workers that they laid off. The businesses have to actually certify that they're going to do that.

[J.R. Whalen]

That's Wall Street Journal reporter Amara Omokwe. Coming up, she'll explain how businesses can apply for the program and what happens if they can't repay the loan. Small businesses in the US employ nearly 60 million workers, but because of the coronavirus pandemic, many have been forced to cut costs by letting go of employees or even temporarily closing. The stimulus bill that passed into law last week will provide $350 billion in loans starting this Friday to help businesses avoid closing permanently. And Wall Street Journal reporter Amera Omokwe is with us to discuss the ins and outs of the program. So, Amera, who specifically is eligible for these small business loans?

[Amara Omokwe]

So essentially any business or nonprofit with fewer than 500 employees would be eligible. There are some exceptions to that, but that's just generally speaking. Also, self employed workers, gig workers, independent contractors would also be eligible. And the main criteria is that the business or the person needed to have been in operation or working as of February 15, 2020. And for businesses and nonprofits, they needed to have paid employee salaries and payroll taxes.

[J.R. Whalen]

How much can a business apply for?

[Amara Omokwe]

The maximum amount a business can apply for is $10 million, and the interest rate on these loans is capped at 4%. But it is important to note that 10 million is the max, and lenders are going to be using a formula that looks at a business's estimate, average monthly payroll and multiplying that by two and a half times to figure out the appropriate amount that a business should get. Treasury Secretary Steven Mnuchin has emphasized that this is a program that's going to help pay payroll and essentially overhead costs. And the way he gets to that is by essentially looking at the formula that says we're going to give you a loan that is the cost of your average monthly payroll times 2.5%. And so that 2.5 times formula is what is going to be used for most businesses. But because this program is also open to businesses that haven't necessarily been in existence that long, and independent contractors, the exact rules are going to be different depending on the structure of the business or the person applying.

[J.R. Whalen]

And how do businesses apply for the loans?

[Amara Omokwe]

This program is essentially a partnership between private lenders and and the Small Business Administration. So private lenders will be issuing the loans, and the loans will be backed by the Small Business Administration. So a business that is interested in this particular program needs to go to a private lender in order to apply. Now, currently, the Small Business Administration says There are about 1,800 lenders across the country that had existing relationships with the SBA and that can issue these loans right away. Treasury Secretary Mnuchin says he essentially wants every FDIC insured institution in the country and additional lenders beyond that to be able to issue these loans. And he says the Treasury Department is working quickly to put together criteria and the framework so that pretty much any lender across the country can be involved.

[J.R. Whalen]

How specifically does the program preserve jobs at small businesses?

[Amara Omokwe]

So lawmakers that worked on this legislation actually called it the Payroll Protection Program. So it really is geared towards the idea of making sure that businesses and nonprofits either keep the workers that they have or rehire workers that they laid off. And actually, in order to get this loan, the businesses have to actually certify that they're going to do that.

[J.R. Whalen]

How would a business's credit rating impact its eligibility for loans?

[Amara Omokwe]

So one thing that we're hearing is that a business's credit profile is really not going to be a factor in whether or not they can get these loans. Lawmakers, the Small Business Administration and the Treasury Department say they're really trying to streamline the process to make these loans as readily available and accessible as possible. So they've said that the main criteria is going to be payroll costs.

[J.R. Whalen]

Now, a lot of the businesses applying for loans most likely are just getting by. What if they can't repay the loan?

[Amara Omokwe]

Well, one very important component of this loan program is that there is a loan forgiveness provision. So businesses who retain or rehire their workers would be eligible for forgiveness on the portions of the loan that are used essentially for overhead costs. So payroll, rent, mortgage obligations, utilities, they'd actually be able to get forgiveness on that portion of the loan. So if, for instance, a business used the entire loan towards those costs, they would be eligible for 100% forgiveness. Now, it is important to note that one of the things that is going to be taken into account when determining the amount of loan forgiveness that a business receives is the level at which they maintained their payroll.

[J.R. Whalen]

Could this be a first phase of several cycles of loans?

[Amara Omokwe]

This could be the first phase of a cycle of loans or a cycle of other programs aimed to help small business owners. Again, Treasury Secretary Mnuchin has said if this program works that they could add more money to it. And lawmakers have already said that they are just basically waiting and seeing how this stimulus package that recently passed works and kind of filters through the economy to determine whether or not they should do even more.

[J.R. Whalen]

All right, that's Wall Street Journal reporter Amara Omocue with us. Amara, thanks for coming on the show.

[Amara Omokwe]

Thank you.

[J.R. Whalen]

And that's yous Money briefing. I'm J.R. whalen for the Wall Street Journal.

[Small Business Owner 1]

Access to affordable credit helps me pay my employees, but I don't really need it.

[Small Business Owner 2]

Infliction is killing me, but who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill.

[Small Business Owner 1]

See, banks and credit unions help small businesses make payroll. This bill would cut the vital resources

[Small Business Owner 2]

they need while increasing megastore profits. They deserve it, don't they?

[Advocate/Opponent of Durbin Marshall Bill]

Tell Congress, stop the Durbin Marshall money grab for corporate megastores paid for by the Electronic Payments Coalition.