The recently passed two trillion dollar stimulus bill, the CARES Act, includes a $350 billion provision for small businesses called the Paycheck Protection Program (PPP). The goal of the program is to get cash to small businesses impacted by coronavirus as quickly as possible. PPP hopes to incentivize business owners to keep employees on the payroll by offering them loan forgiveness.
Who qualifies for the Paycheck Protection Program?
Businesses with fewer than 500 employees that have been impacted by COVID-19 qualify for the Paycheck Protection Program. This includes sole proprietorships, self-employed individuals, independent contractors, nonprofits and veteran organizations.
What can the funds from the Paycheck Protection Program be used for?
- Payroll costs and benefits
- Interest on mortgage obligations incurred before February 15, 2020
- Rent, under lease agreements in force before February 15, 2020
- Utilities, for which service began before February 15, 2020
How much can I borrow through the Paycheck Protection Program?
The maximum amount of money a business can borrow is equal to 2.5 times their monthly payroll costs or $10 million, whichever is lower. If you are a seasonal or a new business, you can use applicable time periods for your application. Payroll costs are capped at $100,000 per employee.
What are the interest rates and when is repayment due?
The PPP loan will have a 0.50% fixed interest rate. Payments are deferred for 6 months; however interest will accrue over this period. Your loan will be due in 2 years.
Will my loan be forgiven?
If you use the loan money for anything other than the reasons listed above, you will have to pay it back. You will also owe money if you do not maintain your staff and payroll. The loan forgiveness will be decreased if you decrease your full-time employee headcount or if you decrease wages for any employee that makes less than $100,000. You will have until June 30, 2020 to restore your employment salary levels for any changes made between February 15, 2020 and April 26, 2020.
How do I apply for a small business loan through the Paycheck Protection Program?
Small businesses and sole proprietorship can apply for PPP starting on April 3, 2020. Independent contractors and self-employed individuals can apply starting on April 10, 2020. You will have until June 30th to submit your application and documentation to an approved lender. The Small Business Administration has a network of at least 1,800 approved lenders and they are in the process of adding more. If your bank is not an SBA-approved lender, you can find a link below to search for one.
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