The federal government will cover the operating costs of businesses in Louisiana for eight weeks through forgivable loans if they retain or rehire laid-off workers under the $2 trillion stimulus package passed by the Senate on Wednesday, which the House is poised to approve on Friday.
The provision to forgive loans appears likely to provide a crucial lifeline in the coming days as the nation copes with the unprecedented ravages caused by the coronavirus to the world economy.
“That will help businesses hold on through this crisis and bring their workers back,” U.S. Rep. Steve Scalise, the No. 2-ranking Republican in the House, said in an interview Thursday from his Jefferson Parish home where he is self-quarantined because of possible exposure to the coronavirus. Scalise said President Donald Trump will sign the stimulus bill immediately.
The U.S. Labor Department released an astonishing set of numbers on Thursday that showed the huge need for the bill: 3.3 million people filed for unemployment insurance last week. That was easily the highest number in 50 years of data, dwarfing the highest previous weekly figure, 695,000, recorded in the depths of the 1982 recession.
In Louisiana, about 10,000 people are filing unemployment claims every day now by phone or online, although the number surged to 14,597 Wednesday, the Louisiana Workforce Commission reported. The normal average is 300 per day.
The federal legislation also will mean a one-time payment of up to $1,200 to most adults, $500 per child and provide an additional $600 per week to unemployed workers who remain jobless through June 30.
Businesses and banks throughout Louisiana were scrambling Thursday to understand exactly how the loan provisions would work. In general terms, companies and nonprofits with up to 500 employees could borrow up to $10 million from their bank to cover payroll, mortgage, rent, insurance and other expenses.
The federal government would essentially forgive the loan for business expenses for eight weeks, said Guy Williams, president and CEO of Gulf Coast Bank & Trust Company — making it essentially a grant.
“You’d be foolish not to be interested,” Williams said, adding that the borrowers would pay 4% interest on money they borrow for spending after the eight weeks have elapsed but would pay no borrowing fees on the loan. Companies have to maintain their pre-coronavirus hiring levels for the loan to be entirely forgiven.
Camille Conaway, a policy analyst with the Louisiana Association of Business and Industry, said 100 business leaders jumped on a conference call Thursday with the state’s congressional delegation, and the main topic was the forgivable loan provision, known as the Paycheck Protection Program.
“Speed is everything right now,” said Conaway. “We have members telling us they’re taking it day by day to see if they can stay open. We’re encouraging each business to talk to their banker to see if this makes sense for them.”
Jude Melville, president and CEO of Business First Bank, said he has been receiving a steady stream of calls about the program.
“We’ll try to get it onto the street prudently and quickly,” he said.
Bill Hammack, who with chef Donald Link owns several notable New Orleans restaurants, said he was already in contact with his bank to initiate a loan.
Hammack said he has had to lay off nearly 400 workers while retaining 100.
“If the government is going to give us the opportunity to keep people employed, we’re definitely going to take advantage of that,” Hammack said. “I’m hoping that it will allow us to hire at least some of them back.”
David Balhoff, who co-owns three orthodontist offices in the Baton Rouge area, is also planning to apply. Balhoff said he and partner Stephen Sherman have been shut down for a month but are still paying all of their 25 employees.
“We’re going to use the loans to pay staff and to pay mortgage and rent on our buildings,” Balhoff said. “The goal is to maintain a viable business with our staff.”
Said Tim Scandurro, who operates the Scandurro and Layrisson law firm in New Orleans, “It allows us to be comfortable and confident to keep our employees on the payroll even though they’re not at the office working.”
Andy Kopplin, president and CEO of the Greater New Orleans Foundation, said the loan forgiveness will be a “shot in the arm” for nonprofits throughout Louisiana.
“Nonprofits are feeling very fragile in terms of their ability to stay open,” Kopplin said. “They’re making the same kinds of decisions as small businesses in terms of laying off employees and maintaining that payroll.”
Michael Hecht, president and CEO of Greater New Orleans Inc. said the program will likely provide major advantages over typical disaster relief programs, which involve loans from the federal Small Business Administration.
“The loans are being made by the private banking system,” Hecht said. “It’s quicker than relying on the existing SBA infrastructure, which is not built for a program of this scale.”
Adam Knapp, president and CEO of the Baton Rouge Area Chamber, agreed.
“The SBA might have taken 20 days in an optimal time frame, but the banks could be putting capital in companies’ accounts in 5-10 days,” Knapp said. “The bottleneck problem gets solved by that provision.”