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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.
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“It’s great that the government has done this so quickly,” said Wendy Cai-Lee, chief executive of Piermont Bank, a digital start-up bank that specialises in lending to small and midsized businesses. “The challenge is in the execution. Banks are still waiting for guidance from the SBA . . . My concern is how quickly we can get the money into the hands of small businesses”, given that they may struggle with the required paperwork.
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