FILE PHOTO: A person in a mask walks on a nearly empty street in the coronavirus outbreak near the Treasury Department in Washington, U.S. March 30, 2020. REUTERS/Jonathan Ernst
WASHINGTON (Reuters) – The U.S. government will cap how much each bank can lend under the emergency loan program designed to keep workers on payrolls amid the coronavirus pandemic, according to a memo seen by Reuters hours ahead of the reopening of the lending program.
The Small Business Administration (SBA) will impose a maximum dollar amount for individual lenders at 10% of Paycheck Protection Program funding authority and pace the applications filed, according to the memo. The steps are “prudent and reasonable” due to the unprecedented demand for the loans, it said.
U.S. banks were girding over the weekend for another frantic race to grab $310 billion in fresh small-business aid due to be released by the government on Monday. The SBA was due to reopen the lending program at 10:30 a.m. ET on Monday, allowing lenders to resume processing piles of backlogged applications from businesses hurt by the coronavirus shutdown.
A spokesman for the SBA did not respond immediately to requests for comment.
Despite technical and paperwork challenges, the program’s first $349 billion of funds was exhausted in less than two weeks and lenders expect the second tranche of cash to be snapped up even faster by tens of thousands of applications queued up.
That has left thousands of small business that have been forced to shut down in order to stem the disease outbreak, without badly needed funds to keep them afloat.
The SBA will take applications in one bulk submission with a minimum of 15,000 loans, the memo said.
Reporting by Michelle Price; Writing by Chris Prentice; Editing by Peter Cooney and Lisa Shumaker