The CARES Act infused an additional two trillion dollars of aid into the economy to help stem the economic impact of COVID-19. Part of the CARES Act was the allocation of $350 billion dollars for the Paycheck Protection Program (PPP).
What is the Paycheck Protection Program?
The Paycheck Protection Program is a stimulus package providing incentives to small businesses to keep their employees on the payroll. Small business can apply for loans through the Small Business Administration requesting funds to cover up to 8 weeks of payroll costs including benefits. These funds will be forgiven by the government provided the business adheres the following loan requirements:
- The funds must be used for payroll costs, interest on mortgages, rent, and utilities.
- 75% of the loan must be used to cover payroll expenses.
- Businesses must maintain current head counts and current salary levels until June 30, 2020. If head count or salaries are reduced, the loan forgiveness will also be reduced.
- No collateral or personal guarantees are required to apply for the loan.
- Businesses will need to share payroll information with the lender for the previous calendar year.
- Any portion of the loan that is not forgiven will need to be repaid over two years with a 6-month deferral period at an interest rate of 1%.
Who Qualifies for the Paycheck Protection Program?
The Paycheck Protection Program is available to small businesses and eligible nonprofit organizations, Veterans organizations, and Tribal businesses described in the Small Business Act. The program is also eligible to individuals who are self-employed or are independent contractors, provided they meet the program standards.
Applying for a Paycheck Protection Program Loan
Please note: The Small Business Administration is currently accepting new applications as of 4/27/2020. The President signed a new bill providing additional funding to the program. This is subject to change, therefore we encourage you to stay informed with the latest at the SBA website.
The Paycheck Protection Program opened for applications on April 3. Many small businesses jumped at the chance to apply for a loan and the program was depleted within a matter of days. Law makers are expected to approve an additional round of funding for the program and are currently in negotiations.
If you are interested in applying for a loan, experts recommend calling a lender and getting an application filled out today. Once additional funding is approved, you will be positioned to receive a loan with the next round of funding. Loans are granted on a first-come, first-served basis.
To review the information that will be requested when you apply, download a copy of the PPP borrower application form.
For full details on the Paycheck Protection Program, please visit the Small Business Administration’s website.