[2006alum]

I thought there was some talk about making these loans no risk to the recipient (i.e., defaulting does not result in loss of any collateral or damage to credit rating, etc.).  Did anything like that make it into the bailout bill?  It's been difficult to find out exactly what's in there.

As is the nature of any fast-moving legislation, it's been very hard to find out exactly what's in it, but there's a NY Times piece from yesterday that sheds at least broad light on how it works. In relevant part:

The $2 trillion stimulus package passed by Congress late Wednesday, which includes more than $370 billion for small businesses such as Ms. Donnelly’s, could bring much-needed help. The bill will allow banks to lend directly to businesses, and those loans will be backed by the Small Business Administration. And although there are restrictions, some of the terms are less onerous than other programs administered by the S.B.A. . . .

The stimulus package is offering small businesses S.B.A.-backed loans to pay for basic expenses. They would not have to repay portions that were spent on paying employees, a mortgage, rent or utilities. The banks lending the money would be reimbursed for those portions by the Treasury Department, which is receiving $377 billion to fund the program.

This seems to suggest that the loans aren't really loans for all those expenses, but effectively grants, although I'm not certain if "paying employees" includes paying a salary to the small business owner. And it doesn't seem clear how long this covers - 1 month? 2 months? 6 months?

And if it doesn't also cover salaries for the small business owners, the three folks I know would each be SOL anyway. But the bigger problem is that in the case of two friends/family who have already had to shutter their small businesses with 1-5 employees, I think this is probably too little, too late. They did so right away so they and their employees could get on unemployment benefits, so would they need to rehire their employees after they get a loan to cover their payroll costs? And if they qualify for unemployment benefits but their salary is not covered under these SBA loans, isn't that kind of a terrible catch 22?

[2006alum]

I thought there was some talk about making these loans no risk to the recipient (i.e., defaulting does not result in loss of any collateral or damage to credit rating, etc.).  Did anything like that make it into the bailout bill?  It's been difficult to find out exactly what's in there.

As is the nature of any fast-moving legislation, it's been very hard to find out exactly what's in it, but there's a NY Times piece from yesterday that sheds at least broad light on how it works. In relevant part:

The $2 trillion stimulus package passed by Congress late Wednesday, which includes more than $370 billion for small businesses such as Ms. Donnelly’s, could bring much-needed help. The bill will allow banks to lend directly to businesses, and those loans will be backed by the Small Business Administration. And although there are restrictions, some of the terms are less onerous than other programs administered by the S.B.A. . . .

The stimulus package is offering small businesses S.B.A.-backed loans to pay for basic expenses. They would not have to repay portions that were spent on paying employees, a mortgage, rent or utilities. The banks lending the money would be reimbursed for those portions by the Treasury Department, which is receiving $377 billion to fund the program.

This seems to suggest that the loans aren't really loans for all those expenses, but effectively grants, although I'm not certain if "paying employees" includes paying a salary to the small business owner. And it doesn't seem clear how long this covers - 1 month? 2 months? 6 months?

And if it doesn't also cover salaries for the small business owners, the three folks I know would each be SOL anyway. But the bigger problem is that in the case of two friends/family who have already had to shutter their small businesses with 1-5 employees, I think this is probably too little, too late. They did so right away so they and their employees could get on unemployment benefits, so would they need to rehire their employees after they get a loan to cover their payroll costs? And if they qualify for unemployment benefits but their salary is not covered under these SBA loans, isn't that kind of a terrible catch 22?