$350B isn't going to be enough
The US launched its $350B small business loan program today. The money is going to run out in very short order.
It's available for businesses with 500 employees per location, which makes a mockery of the 'small business' title.
The details are extremely generous. It's basically a giveaway. The full amount of the loan will be forgiven if it is used for payroll, mortgage interest, rent or utilities in the two months after the money is received.
Even if the money isn't forgiven, it will come at in interest rate of 0.5% and be due in two years.
The banks are going to make out like bandits, according to the FT:
Banks will receive processing fees, paid by the federal government, for making the loans. The fees will vary with loan size: 5 per cent for loans under $350,000, 3 per cent for loans under $2m, and 1 per cent for loans greater than $2m. The loans will not incur a capital charge.
At an average of 2%, that's $7B straight to banks.
If you have a business in the United States and you're not lining up to get this money today, you're making a big mistake. There should be a lineup outside the bank trying to get this.
