The US government doubled the interest rate on coronavrius bailout loans for small businesses after banks complained they would lose money

• The US government began offering $350 billion in small business loans via private banks on Friday.
• The interest rate was doubled on the aid after smaller lenders complained the original 0.5% rate would create losses.
• Larger banks like JPMorgan Chase had warned that they were not prepared to take applications as early as the White House had hoped.
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The US government doubled the interest rate on $350 billion in loans available to small businesses from 0.5% to 1% on Thursday after small banks reportedly complained they couldn't afford to lend at such a low rate.

In a letter to Treasury Secretary Steven Mnuchin on Wednesday, a consortium of community bankers said the low interest rate could create "unacceptable losses" for smaller lenders. Large banks, meanwhile, had said the Paycheck Protection Program, as the scheme was dubbed, still had wrinkles to be worked out.

"They're not ready at all, they're desperately awaiting guidance on how to do this," Ami Kassar, the chief executive of small business loan advisory firm MultiFunding, told CNBC. "I think it's going to be a mess for weeks."

Still, Mnuchin affirmed the agency's commitment to getting the loans out quickly on Thursday.

"You will get the money," he said at a White House press conference., according to The Wall Street Journal. "You will get it the same day. You use this to pay your workers. Please bring your workers back. This is a very important program."

Importantly, the entire loan amounts, including interest, can be forgiven so long as businesses use the funds to "keep employees on the payroll and for certain other expenses," the treasury said. The loans do not require collateral either.

Regardless of the rate, the funding is desperately needed. A study by the US Chamber of Commerce released Friday showed that nearly a quarter of all small businesses had already shuttered in response to the pandemic, with another quarter less than two months away from insolvency.

Minneapolis Federal Reserve President Neel Kashkari said Thursday that the administration should be generous with rescue funding.

"We need to err on the side of being generous, helping as many small businesses, as many small profits as we can to retain their workforce," Kashkari, who helped engineer the 2008 bailout, said. "It's much better to keep workers attached to their businesses so that when the crisis is behind us, we can then turn the economy back on as opposed to have to reorganize the economy."

Information for businesses and the application for aid can be found on the treasury website.

Are you a small business applying for aid? We want to hear about your experience. Get in touch with this reporter at grapier@businessinsider.com.

And get the latest coronavirus analysis and research from Business Insider Intelligence on how COVID-19 is impacting businesses.