The U.S. Hispanic Chamber of Commerce and Goldman Sachs announced Tuesday a plan that will make it easier to lend to small businesses hit by the COVID-19 pandemic, which has severely affected Latino workers and businesses.
The Hispanic Chamber and Goldman Sachs initiative offers chamber members access to Wage Protection Program (WPP) loans through CDC Small Business, one of the largest community lenders in the United States.
Last week the House of Representatives approved a relaxation of the requirements in the original PPP and the initiative, now in the Senate, extended the deadlines for applying for the aid.
Nydia Velazquez, D-NY, who chairs the House Small Business Committee, said the changes are necessary to address a pandemic that continues to require social distancing measures to keep many businesses closed or operating at limited capacity.
PPP is a $669 billion program established by emergency aid legislation passed by Congress and signed into law by President Donald Trump last March as the first step in stimulus to keep the economy afloat during the pandemic.
The program allows businesses with fewer than 500 employees to apply for and obtain low-interest private loans to cover salary payments and some other costs. The amount of a PPP loan is approximately 2.5 times the average monthly cost of wages the business has to pay.
The funds obtained can be used to cover salaries, rent, interest and services such as electricity, gas and water, and the program, managed by the Small Business Administration (SBA), can be partially or totally forgiven if the company maintains the same number of workers and stable salaries.
According to the announcement, the unique nuance of loans managed by CDC Small Business is that its mission is to operate with businesses that often do not obtain services from conventional financial institutions, or that may need additional technical assistance to complete the loan application process.
The proposed changes in the legislation lower from 75% to 60% the proportion of the PPP loan that should be used to pay salaries, leaving the rest to cover other expenses of the company’s operation.
They also extend the period covered by the loan from 8 to 24 weeks, and extend the period for loan repayment from 2 to 5 years if the outstanding amount is not converted into a grant.