- Jun 6, 2007
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For the Senate Stimulus Bill at least one element of it is weak specifically "The Paycheck Protection Program". What this program tries to do is provide financial assistance to businesses to get them going once government authorities give parts of the country the green light to re-open for business. Specifically, the way this legislation works is it loans businesses a hundred and twenty-five percent of their pre-shutdown payroll for two months; the big carrot for business borrowers in this program is the government will forgive that percentage of the loan equaling the percentage of pre-shutdown workforce the business retains for the first two months they re-open. It is a great concept because it really incentivizes businesses to retain as many jobs as they reasonably. The actual framework in the Senate bill is weak it doesn't optimally factor in the facts on the ground. When authorities re-open the economy the virus will be far from eradicated, people will demand this early timeline because people want their life and the country's life back and people rightly believe that if authorities do their duty in creating protective efforts America is being considerate to the vulnerable. The early timeline means businesses will not see their normal revenue and business activity the time frame for the scale up to normalicy will be at least three months. So what Washington should do is make the covered period for this program three months. In order to cut down on the cost of this program a little limit eligibility to business borrowers that own less than fifty million dollars in cash and cash equivalent assets (U.S. Treasury securities, etc.) and for these chain individual businesses that are eligible (businesses that have a North American Industry Classification Code beginning with 72 like hotel chains) limit those eligible businesses to ones that own less than five hundred million dollars in cash and cash equivalent assets. The other not so good feature of the Senate bill is that it limits "Paycheck Protection Program" loans that are eligible for "forgiveness" to ones authorized by a section of the Small Business Act that only authorizes maximum loans of one million dollars so essentially the Senate version limits the loan forgiveness to a million dollars per business. Now other parts of this Program actually authorize Small Business loans up to ten million dollars. Wisdom calls for the assessment that if the country really wants to incentivize America's businesses across the board, its internet companies its manufacturing plants and its construction companies, to retain a large portion of their workforce and help these American families whose incomes are at stake here the Federal government has to help these bigger employers with bigger payrolls. To this end the legislation should scrap this loan limitation for the loan forgiveness program and make the forgiveness program open for all SBA loans authorized by the program but just limit the loan forgiveness amount to five million dollars per business.
The program should make the interest rate on these loans two and a half percent (2.5%) for all borrowers not a maximum four percent which the Senate Bill mandates, many financial experts are saying the economy won't be close to normal until the middle of next year let us try to make these loans as less burdensome as possible so these businesses make it through; the U.S. government average borrowing rate is probably around two percent so 2. 5 is definitely reasonable and listen with with what the market will bear with current interest rates lenders should be able to readily resell these loans at 2.5%. Further, the enabling legislation should really help these borrows from the standpoint have these loans treated like a good car loan meaning that the interest rate is only applied against outstanding principal so borrowers can reduce their overall borrowing costs by paying down principal early. Make the loans seven years in length not ten years seven years is plenty of time for the borrow to accumulate the money to pay back the loan making the loans a longer term seems to me would increase the loan loss in the program. Extend out the date for which business borrowers can take out the loans offered by this program until September 30th, the Senate bill has a deadline of June 30th; some areas of the country that are epicenters of the Corona-virus may not re-open up until the end of June or later pursuant to the experts assessments and we don't want America's businesses to take out these loans until it is within days of re-opening the economy because once they take out the loan the two (hopefully changed to three) months clock will begin ticking where they need to have their employee staff on their payroll or they will lose a portion of their loan forgiveness potential!
I would forewarn Democrats and their allies to not be taken in by Republican Majority Leader Senator Mitch McConnell's all of a sudden new outlook on the crisis this Thursday where he says we will do another stimulus package, don't assume this means everything is very well - nothing is ever very well with Senator McConnell. Look at Senator McConnell's initial stimulus bill it was one-sided toward the business community and consider the record this Senator has spent a life-time in Washington maneuvering for big business and the wealthy at the expense of ordinary Americans, fix the current policy initiatives in the current bill before you pass it, don't plan on fixing it in later bills because you will find Senator McConnell will exact a huge price for later fixes and you will ultimately learn you made a catastrophic mistake in relying on Senator McConnell's good will!
The program should make the interest rate on these loans two and a half percent (2.5%) for all borrowers not a maximum four percent which the Senate Bill mandates, many financial experts are saying the economy won't be close to normal until the middle of next year let us try to make these loans as less burdensome as possible so these businesses make it through; the U.S. government average borrowing rate is probably around two percent so 2. 5 is definitely reasonable and listen with with what the market will bear with current interest rates lenders should be able to readily resell these loans at 2.5%. Further, the enabling legislation should really help these borrows from the standpoint have these loans treated like a good car loan meaning that the interest rate is only applied against outstanding principal so borrowers can reduce their overall borrowing costs by paying down principal early. Make the loans seven years in length not ten years seven years is plenty of time for the borrow to accumulate the money to pay back the loan making the loans a longer term seems to me would increase the loan loss in the program. Extend out the date for which business borrowers can take out the loans offered by this program until September 30th, the Senate bill has a deadline of June 30th; some areas of the country that are epicenters of the Corona-virus may not re-open up until the end of June or later pursuant to the experts assessments and we don't want America's businesses to take out these loans until it is within days of re-opening the economy because once they take out the loan the two (hopefully changed to three) months clock will begin ticking where they need to have their employee staff on their payroll or they will lose a portion of their loan forgiveness potential!
I would forewarn Democrats and their allies to not be taken in by Republican Majority Leader Senator Mitch McConnell's all of a sudden new outlook on the crisis this Thursday where he says we will do another stimulus package, don't assume this means everything is very well - nothing is ever very well with Senator McConnell. Look at Senator McConnell's initial stimulus bill it was one-sided toward the business community and consider the record this Senator has spent a life-time in Washington maneuvering for big business and the wealthy at the expense of ordinary Americans, fix the current policy initiatives in the current bill before you pass it, don't plan on fixing it in later bills because you will find Senator McConnell will exact a huge price for later fixes and you will ultimately learn you made a catastrophic mistake in relying on Senator McConnell's good will!
