An uncertain beginning to the $350bn program of loans to US small business, a key part of the $2trn congressional stimulus.
Three articles overnight (again these are behind pay walls) highlight some problems: The WSJ highlights lack of clarity about criteria for qualifying for SBA guarantee and bank liability if the loans they extend turn out not to meet those criteria; The FT highlights the complexity of the online portal through which banks submit loan applications to the SBA for approval. Another WSJ article focuses on the balance sheet constraints of bank lenders (even though loans are guaranteed and will be purchased by the SBA, under current law there is a 7 week wait before they go off financial institution balance sheets, but a new Federal Reserve program to be announced later this week should address this issue, along with another Fed program for businesses too large (more than 500 employees) to qualify for the SBA program)
But maybe the US is not doing so badly. The SBA point out that since the scheme launched on Friday April 3rd, by Monday 6th, they had processed $38bn of loans to 130,000 businesses, that’s an average loan of $290,000. So money is getting out there. Compare the equivalent program in the UK operated by the British Business Bank. Only 983 loans had been agreed by Friday April 3rd, four days after the UK scheme went live (though the conditions on lending are now being relaxed)
My suggestions if anyone is listening, link the available lending to % fall in revenue, increase, provide 100% guarantees & remove any further legal liabilities for banks provided they have checked out this condition.