You no doubt have heard about the Coronavirus Aid, Relief, and Economic Security (CARES) Act that allocated $349 billion to help small businesses keep workers employed amid the pandemic and economic downturn. One of the features of the CARES Act is the Paycheck Protection Program.
What is it?
The Paycheck Protection Program is a loan that provides small businesses with an incentive to keep their workers on payroll. SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. This loan has a maturity of two years and an interest rate of 1%. Loans can be for up to two months of your average monthly payroll costs plus 25%
How much of my loan can be forgiven?
The loan can be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (at least 75% of the forgiven amount must have been used for payroll). Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
Who can qualify?
This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by coronavirus/COVID-19.
What do I need to apply?
You will need to complete the Paycheck Protection Program loan application and submit the application with the required documentation to an approved SBA lender by June 30, 2020.
Update 7/7/2020: The deadline to apply for an intial PPP loan has been extended to August 8, 2020.
How do I apply?
These loans are administered through select bank or other financial institutions. The SBA website can help you to find a lender in your area. Existing SBA lenders began processing loan applications on April 3, 2020. Other regulated lenders will be available to make these loans as soon as they are approved and enrolled in the program. Contact your bank directly to receive an application and for a list of the specific documents you will need to provide to them.
Looking for additional information on what you can do during this difficult time? Be sure to visit our Resources page for updates on government aid programs as well as practical steps you can take within your business.
Note: The information provided in this blog does not, and is not intended to, constitute legal or tax advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information in this blog may not constitute the most up-to-date information. This blog contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser.