Mission Valley Bank Answers Questions About Paycheck Protection Program Loans

Posted by: Michael Brown in Economy, Santa Clarita Latest News April 8, 2020 - 4:08 pm 0 1,359 Views

Officials with Mission Valley Bank released a video Monday detailing the real costs that businesses face when they consider whether or not to take out a loan using the Paycheck Protection Program.

https://www.youtube.com/watch?v=Sm5To4t33H8&feature=youtu.be&fbclid=IwAR3OmBtax7lG42xVOLs5hfpGczeld2EkRwrN9LORDv0HMdk8i7YwvxeOZa4

With the recent passage of the Coronavirus Aid, Relief and Economic Security (CARES) Act, businesses can now file for loans authorized by the Paycheck Protection Program that lend up to 250 percent of their average monthly payroll costs.

Under the Paycheck Protection Program, small business owners apply for the loan with a bank, who then either approves or denies that loan. The U.S. Treasury Department then essentially forgives the debt, allocating $350 billion to pay the banks back the loaned out money in June.

However, many business owners have questions about the loan, ranging from how they can spend it to how much they will owe after the initial funds are issued.

Additionally, banks were flooded over the weekend with loan applications upon opening their respective online portals. Government websites struggled to operate under the intense load they experienced.

Among those that struggled to access the loan application sites set up by the Small Business Administration (SBA) was KHTS Owner Carl Goldman.

“I think it’s much more valuable going through our regular banks rather than to try and navigate the SBA’s stuff. I tried to and that was challenging,” Goldman said. “I spent an entire weekend on the website, and because so many people were trying to get on the site, it would shut down and I’d have to start all over again.”

See Related: How Local Banks Are Impacted By The CARES Act’s Small Business Paycheck Protection Loans

In response to the growing confusion, officials with Mission Valley Bank have begun working on a series of videos aimed at explaining the various loan programs offered under the CARES Act. The first of these videos was released Monday, and it discusses some of the actual costs associated with the Paycheck Protection Program.

“There is a lot of confusion with these programs, some of which is due to ambiguity or lack of clarity in the (CARES) Act,” said Tamara Gurney, CEO and president of Mission Valley Bank. “On top of that, there is a lot of emotion and stress out there. We hope to provide some clarity and calm some nerves in the process.”

In the video, Mission Valley Bank Executive Vice President and Chief Credit Officer Daniel Epstein walks viewers through what a small business owner may have to pay back using a real-world example.

“Under the program, there is a very set calculation in respect to how much you have to spend on payroll and how much you have to spend on non-payroll costs,” Epstein explains in the video. “The ratio is 75:25.”

This means that any amount of money from over 75 percent of the loan that is spent on payroll-related costs will not be forgiven. Similarly, any amount of the loan spent over the 25 percent mark for non-payroll costs will not be forgiven.

“Nothing is free,” Epstein said.

Residents who wish to learn more about the costs of the Paycheck Protection Program can watch the full video above, or click here.

Anyone with further questions on the Paycheck Protection Program or other parts of the CARES Act can ask their questions live on Facebook during a special online event on Thursday, April 9 on the KHTS Radio Facebook page

“It’s a great opportunity for everyone to get the basic information they need, and more importantly, to get a better understanding before they start down the path,” Goldman said.

The live event is set to begin at 2:15 p.m. via Facebook Live. Viewers can like and follow the KHTS Radio Facebook page ahead of time in order to receive a notification of when the stream begins.