The US Department of Agriculture (USDA) is to provide up to $1 billion in loan guarantees to rural businesses, helping them meet working capital needs during the COVID-19 pandemic.
It marks the latest expansion of the CARES Act, which also introduced the Paycheck Protection Program (PPP). Not all rural businesses meet the requirements for the PPP.
Agricultural producers not already eligible for USDA Farm Service Agency loans can now receive funding through the USDA’s Business & Industry (B&I) CARES Act Program.
Loans must be used as working capital to prevent, prepare for, or respond to the effects of the COVID-19 pandemic.
“Under the leadership of President Trump, USDA is committed to being a strong partner to rural businesses and agricultural producers and being a strong supporter of all aspects of the rural economy,” US Secretary of Agriculture Sonny Perdue said.
“Ensuring more rural agricultural producers are able to gain access to much-needed capital in these unprecedented times is a cornerstone of that commitment.”
The USDA will provide guarantees of 90% on the loans, with application and guarantee fees set at 2%.
Only rural businesses, including agricultural producers, will be able to apply for the loans. Companies must have been in operation since at least February 15, 2020.
The deadline to receive loan applications is June 22, 2020 or until funds are expended, with the program due to expire on September 30, 2021.
While the USDA intends to consider applications in the order they are received, according to a notice from the department, it said it might assign priority points to projects if the demand for funds exceeds availability.
The USDA is in the process of developing application guides for lenders and borrowers, and will host webinars to explain the program’s requirements on May 27 and June 3.
The first round of the PPP provided $349 billion worth of loans to small businesses across the US, but it was exhausted within a matter of days. Lawmakers approved an expansion of the PPP scheme with $320bn in extra funds in early April.
According to data from the Small Business Administration (SBA), which is overseeing the implementation of the PPP, the loans have reached nearly half of all small businesses in every state.
However, despite the early flood of demand, the rate of applications has fallen during May and approximately $150 billion remains untapped.
Analysts at S&P Global calculated that, by mid-May, banks had collected roughly $20 billion in fees from processing PPP applications and payments (based on data from the Small Business Administration).
Tagged under Retail Banking, Financial Trends, Feature, Duties, The Economy, Compliance, Customers, Fair Lending, Compliance Management, Compliance/Regulatory, Community Banking, PPP, Covid19, Feature3, Commercial,