Venture capital-backed private companies will be eligible for up to $10m in small business loans guaranteed by the US government as part of a $350bn initiative, Axios reported yesterday.
Kevin McCarthy, minority leader in the US House of Representatives, confirmed to Axios that companies will be able to receive financing through the Paycheck Protection Program (PPP), which is intended to help small businesses retain staff through the Covid-19 crisis.
Covid-19 has led to widescale shuttering of customer-facing businesses in recent weeks in addition to those where employees cannot work from home, leading to revenue dropping off significantly or even disappearing for many companies, including some in the startup space.
PPP loans are available to any company with fewer than 500 employees but a business with higher numbers of staff could be eligible if they can meet the US government’s Small Business Administration (SBA)’s size standards.
Businesses will be able to secure up to $10m through the plan and the loans will have a maturity of two years and a 1% interest rate.
Lenders will be repaid by the government and will be able to begin processing loans from today. The initiative is intended to last to the end of June this year.
The SBA will forgive loans if all a company’s employees keep paying workers for eight weeks and they can show the cash has gone to payroll, rent, mortgage interest or utility payments, though that will only apply if a minimum of 75% has gone to cover payroll.
Some of the areas of the tech economy most severely affected by the Covid-19 shutdown include ride hailing, advertising, live event promoters and manufacturing-heavy industries, though other sections could be vulnerable as the economic downturn causes demand and revenue to fall.
However, although some $350bn in funds have been allocated to PPP, the biggest issue with the scheme could be that many banks are unready to issue such loans, mainly because guidance was provided relatively late, according to a report in Forbes yesterday.
