What Businesses Need to Know About Emergency Loan Options

Small-business owners will be able to get loans under the stimulus bill this week. President Trump signed on March 27 the Coronavirus Aid, Relief, and Economic Security Act. The legislation provides a stimulus package worth approximately $2 trillion. The CARES Act expanded certain loan programs administered by the Small Business Admin. It also created a new SBA program to help small-business owners affected by the coronavirus outbreak. The loan programs all have different purposes so small businesses will have to compare what option works best for them.

The bill established a new $349 billion program to help smalls keep their workforce on the payroll. The Paycheck Protection Program will provide capital to small businesses without collateral requirements, personal guarantees or SBA fees. All loan payments will be deferred for six months but will accrue interest during this period. The SBA will forgive the portion of the loan that is used to cover the first eight weeks of payroll costs, rent, utilities and mortgage interest. Businesses must keep their workforce largely intact during that period to qualify for loan forgiveness. No more than 25% of the forgiven amount can be used for non-payroll costs. Loans can be for an amount 2.5 times the borrower’s average monthly payroll costs for a maximum of $10 million. The interest rate will be fixed at 1% (You can find more information about the program here. The loan application form for borrowers can be found here).

Many small businesses will likely qualify for Payroll Protection loans. Businesses and other employers must have been in operation on February 15, 2020, to qualify. Small businesses, nonprofits, self-employed individuals and veterans organizations with 500 or fewer workers can apply for the loans under the new program.  Some businesses with fewer than 1,500 employees in certain industries may qualify, too (click here to see more information about the SBA’s size standards). Businesses that have pending or existing SBA disaster assistance loans can still receive funding through the Paycheck Protection Program as long as the loans aren’t used for the same thing. A single business can only apply for one loan under the program, but owners with multiple business entities can apply for each of them separately. Small business owners can begin applying for PP loans on April 3. Independent contractors and people who are self-employed can begin applying on April 10.

Some lenders will have to become certified by the SBA before they can participate in the PP program. Because the anticipated response is greater than anything ever experienced by the SBA, the agency will allow lenders that don’t currently participate in any of its loan programs to process and service these loans. Federally insured banks, credit unions, farm banks and a broad range of nonbanks can participate in the Paycheck Protection Program, but they must be certified by the SBA first. The loans will come with a 100% guarantee from the SBA. The agency will speed up the certification process. Lenders have the authority to approve loans on the spot so folks can get their money on the same day. Lenders will be compensated by processing fees paid by Uncle Sam. (You will likely have to open an account at the bank where you applied for the loan if you don’t already have an account there.)

For businesses that need a quick infusion of capital to cover expenses right now, a disaster loan and an emergency grant could help. The CARES Act broadened the existing Economic Injury Disaster Loans program maintained by the SBA. The CARES Act significantly expanded the disaster loan eligibility and can provide emergency cash advances that may qualify for forgiveness if used for paid leave, payroll maintenance, meeting higher supply chain costs and other qualified expenses. Those applying for a disaster loan can also receive a cash grant of up to $10,000 within three days of applying for the loan. There are restrictions on businesses that receive the loans. Small businesses must apply for the loans directly with the SBA. See  https://disasterloan.sba.gov/ela/

For those needing help to keep up with payments on your current SBA loan, the agency’s Small Business Debt Relief program could help. The program provides immediate relief to small businesses with non-disaster SBA loans, such as the SBA’s 7(a) and 504 loans, and microloans. Under the program, the SBA will cover all loan payments on existing loans, including principal, interest and fees, for six months.

What Deutsche Bank’s Retreat Means for U.S. Banks

Deutsche Bank’s plan to downsize is a boon for U.S. investment banks. Germany’s largest bank recently announced that it will cut 18,000 jobs and shut its global equities sales and trading business. The institution will now focus on corporate banking, and asset and wealth management. The bank has been under pressure after years of low profitability, money-laundering scandals and more competition from U.S. investment banks on its own turf. Continue reading “What Deutsche Bank’s Retreat Means for U.S. Banks”

Mortgage Lending Will Decline Next Year as Demand for Refinancing Falls

Mortgage lending at U.S. banks will decrease in 2019 as rising borrowing costs reduce demand from homeowners to refinance their current homes.

Despite higher mortgage rates, demand for home-purchase loans will increase slightly in 2019 because of rising wages and slower home-price growth. Home-purchase loan originations should increase next year about 4% from 2018, according to the Mortgage Bankers Association. This year, purchase loan originations should increase around 3% from 2017. Continue reading “Mortgage Lending Will Decline Next Year as Demand for Refinancing Falls”

The Housing Market Will Get Even Tighter This Year

More folks are eager to buy this year, but the supply of homes for sale just isn’t big enough. Competition for listings figures to be fierce for the rest of 2018. Still, some signs of relief are starting to appear.

The market is still plagued by too few homes for sale – the legacy of the construction bust that followed the bursting of the bubble a decade ago. Fewer homeowners are inclined to sell when they know finding a new place could be tough. The supply of homes is constrained because residential construction has been weak for years. As inventory levels of new homes fell in most markets, homeowners who wanted to trade up became concerned that they wouldn’t be able to find what they wanted if they sold their home. Instead, many stood pat and invested in home improvements. New listings of existing homes fell, making it more difficult for first-time home buyers to find something. Continue reading “The Housing Market Will Get Even Tighter This Year”

Some Hurdles Hamstring Homebuilders

A lack of buildable lots and a shortage of skilled labor are among the major issues facing homebuilders. With builders unable to find qualified workers to fill vacant positions, the rate of job openings in the construction industry is now greater than during the housing boom in the early 2000s.

 The skilled-labor shortage is likely to continue. Many young workers joined the industry during the boom, but lost their jobs during the Great Recession. When the energy sector began to slow down a couple of years ago, many of these workers were expected to rejoin the building industry. For a variety of reasons, though, a large share didn’t return to their old positions or other jobs in the industry. The average age of construction workers is around 41 years old. The average age was much lower during the construction boom of the early 2000s, indicating that the industry has lost many younger workers. The industry has started to make efforts to recruit younger people, but the product of these efforts isn’t likely to materialize right away. Continue reading “Some Hurdles Hamstring Homebuilders”

How Will the Presidential Election Affect the Housing Market?

If Democrats hold on to the White House, will that help the price of your home? Or would the housing market fare better with a Republican victory? The fact is, it won’t matter much which party wins the White House in November — at least not when it comes to housing prices.

A study of real estate in California going back to 1980, found that housing prices rose by as much as 6% in the year before an election and about 5% in the year after an election, but only 4.5% during election years. A possible explanation for the slower price growth is that presidential elections create uncertainty, making people less likely to take chances on large purchases, thus slowing down the rate of increase in home values.

The California Association of Realtors has looked at home prices in the state dating back to 1990 and found that elections historically have had little or no negative impact on the California housing market. It did find that house prices rose slightly faster in the last months of the last five presidential elections.

Continue reading “How Will the Presidential Election Affect the Housing Market?”