7 Bank Stocks That Could Get a Lift From SBA Loans
A select group of bank stocks are in the midst of facilitating what might be the most ambitious lending program in U.S. history. It's part of the $2 trillion CARES Act, intended to help small businesses survive the impact of the coronavirus.
As part of this plan, the U.S. Congress has funded $350 billion of small business loans. And businesses ran through this money so fast that the Senate has passed another $484 billion relief bill, $310 billion of which will go toward the Paycheck Protection Program - a major part of the CARES Act.
These loans are 100% federally guaranteed and are made through a network of approved Small Business Administration (SBA) lenders. Small businesses may borrow up to $10 million under this program, with loan amounts capped at 2.5 times monthly payroll costs. Borrowers that continue to pay their workers through the end of June may have the full loan amount forgiven at the end of the two-month period.
Hundreds of billions of dollars in SBA loan volumes could generate billions of dollars of processing fees for lenders. According to Financial Times, lenders receive a 5% fee on loans below $350,000, 3% for loans below $2 million and 1% for loans exceeding $2 million. An added benefit is that these loans carry minimal risk since repayment is guaranteed by the U.S. government.
These SBA loans are welcome news for a number of
