The V.I. Economic Development Bank has voted to make $1.2 million available for borrowing through the Paycheck Protection Program.
The program, which is backed by the U.S. Small Business Administration, offers loans to businesses affected by the novel coronavirus that will be forgiven if the company keeps all employees on the payroll for eight weeks and the money is used for rent, mortgage interest or utilities.
Monique Samuel, Acting Director of Lending for the Economic Development Bank, initially suggested that $2.3 million in available funds from the Development Loan Program, which has $5 million total, should be made available to borrowers who have otherwise been unable to get a bank loan.
“We wanted for the businesses to have additional options,” Samuel said.
No collateral is required for the loans, which are secured by the Small Business Administration guarantee, Samuel said.
While the EDA’s bank offers a variety of loan programs, “none of the funding that we have is allowed to be forgiven,” unlike the Paycheck Protection Program, Samuel said. Loan forgiveness “is not automatic,” however, and Samuel said loan recipients need to go through a second application process in order for the funds to be forgiven.
Guidance for the forgiveness program “is still being developed,” she added.
The program expires on June 30, and Samuel said the bank will need to act quickly if they want to provide this money to businesses.
Acting CEO Wayne Biggs Jr. said that if no loans are made, the money would revert back to the Development Loan Program, but acknowledged that “it is a risk” that could end with business owners unable to repay loans that were not eligible for forgiveness.
“It happens that loans go bad. We’re in unprecedented times, we don’t know how the economy will bounce back or if it will bounce back,” Biggs said. “We’re a lender of last resort and we’re here to try to drive the economy, so I think a program like this is helpful.”
Board members agreed to reduce the suggested amount from $2.3 million to $1.2 million in available program funds, and voted unanimously to approve the measure.