The loan program is designed to help small American businesses survive the coronavirus recession, and was part of Washington’s $ 2 trillion economic stimulus package.
Smaller banks, those with assets of less than $ 250 million, can also receive a significant windfall.
“It could be hugely profitable for us, perhaps the most profitable thing we have ever done,” according to Rick Wayne, president and CEO of Northeast Bank, a community bank with nine branches in Maine that also handles business loans across the country. According to S&P, the bank will raise $ 9.8 million in PPP loan fees.
Rates vary from 1% to 5%, depending on the loan.
While the optics of profiting from the disgrace of the pandemic recession may look bad, advocates of the program say US banks have been a lifeline for businesses during a devastating recession.
The Covid-19 pandemic forced American companies to close and fire millions of workers during the height of the shutdown. As the economy reopens, many businesses still need help to survive the significant decline in income.
Unlike the 2007-2009 financial crisis, banks are in better shape to weather the current storm, the Fed said.