Wells Fargo & Co (NYSE:WFC) has received a temporary respite from the Federal Reserve to offer emergency loans of up to $10 billion to small businesses. Several small businesses are eagerly waiting for funds because of the worsening coronavirus crisis.
To disburse funds up to $10 billion to firms with 50 employees
According to the announcement over the weekend, Wells Fargo, the fourth-largest bank in the US, would disburse emergency loans of up to $10 billion for the businesses with less than 50 employees or non-profit organizations. It is part of the PPP (Paycheck Protection Program). The US Government has enacted the CARES Act in March 2020 to support the small businesses with emergency loans and offer financial relief for several million people, who are affected by the coronavirus crisis, in the US.
Federal Reserve places a cap on Wells Fargo
The Federal Reserve has placed a cap on the Wells Fargo assets in early 2020 because of the creation of fake accounts between 2002 and 2016 to meet the sales targets. Wells Fargo agreed to settle the fake accounts case by paying $3 billion. The Federal Reserve on Wednesday announced plans to lift the cap temporarily to help midsized companies. It applies only to the PPP program.
Charlie Scharf, Chief Executive Officer of Wells Fargo, said it would immediately expand its participation. He said the bank received over 170,000 interests for the loans in the first two days alone. However, the demand for emergency loans is still large.
Businesses with over 500 employees to get low-interest loans
Businesses that employ over 500 people can benefit from low-interest loans under the $349 billion PPP program. They can avail loans up to $10 million. Such loans are forgiven if the businesses spend at least 75% of the loan amount on keeping the employees on the payroll. The program received an enormous response.
Small business administration receives 275,000 applications
The small business administration has received over 275,000 applications as of Tuesday for loans amounting to $75 billion. Also, the congressional leaders and the Trump administration are striving to support the small businesses by adding another $250 billion.