The interest rate will be 100 basis points or one percent.
The Administrator, in consultation with the Secretary, determined that a one percent interest rate is appropriate. First, it provides low cost funds to borrowers to meet eligible payroll costs and other eligible expenses during this temporary period of economic dislocation caused by the coronavirus. Second, for lenders, the 100 basis points offers an attractive interest rate relative to the cost of funding for comparable maturities. For example, the FDIC’s weekly national average rate for a 24- month CD deposit product for the week of March 30, 2020 is 42 basis points for non-jumbo and 44 basis points for jumbo (https://www.fdic.gov/ regulations/resources/rates/). Third, the interest rate is higher than the yield on Treasury securities of comparable maturity. For example, the yield on the Treasury two-year note is approximately 23 basis points. This higher yield combined with the fact that the loans are 100 percent guaranteed by the SBA and the fact that lenders will receive a substantial processing fee from the SBA provide ample inducement for lenders to participate in the PPP.
Section 2(i) of April 3 Guidance
- What certifications need to be made for PPP?
- What happens if PPP loan funds are misused?
- How can PPP loans be used?
- What forms do I need and how do I submit an application?
- Do independent contractors count as employees for purposes of PPP loan forgiveness?
- Can my PPP loan be forgiven in whole or in part?
- When will I have to begin paying principal and interest on my PPP loan?
- Is the PPP ‘‘first-come, first-served?’’
- Can I use e-signatures or e-consents if a borrower has multiple owners?
- Can I apply for more than one PPP loan?
- What will be the maturity date on a PPP loan?
- What is the interest rate on a PPP loan?
- Do independent contractors count as employees for purposes of PPP loan calculations?
- Is there anything that is expressly excluded from the definition of "payroll costs" for the PPP?
- What qualifies as ‘‘payroll costs’’ for PPP?
- SBA Guidance Lookup
- April 28, 2020 PPP Interim Final Rule, Seasonal Employers
- April 27, 2020 Guidance Memo, XML File Submission Process for Paycheck Protection Program
- April 24, 2020 PPP Interim Final Rule, Promissory Notes, Authorizations, Affiliation, and Eligibility
- April 14, 2020 PPP Interim Final Rule, Additional Eligibility Criteria and Requirements for Certain Pledges of Loans
- April 3, 2020 Privacy Impact Assessments
- April 3, 2020 PPP Interim Final Rule
- April 3, 2020 PPP Affiliation Interim Final Rule