According to treasury.gov, “The Paycheck Protection Program (“PPP”) authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. All loan terms will be the same for everyone.” This is a loan that was designed to help small businesses keep their employees on payroll during this pandemic. More specifically, the program is for small business with less then 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organizations or 501(C)(19) veterans organizations affected by coronavirus. There are some exceptions to the 500 employee limit, for further information you will need to read the SBA’s size standards for those individual industries.
The sole purpose of these loans is to cover payroll costs, most mortgage interest, rent and utility costs over the eight week period that the loan is made. Head count and compensation needs to to be maintained during this period. If these guidelines are followed the loan amount will be forgiven.
The sba.gov website states that “The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.”
The loan forgiveness is based upon the employer maintaining it’s head count or quickly re-hiring employees that had been let go to maintain the current salary level. If the number of employees drops or salaries decline then the amount of the loan forgiven will be reduced accordingly. The terms of the loan is 2 years at an interest rate of .5%.
“Starting April 3, 2020, small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders. Starting April 10, 2020, independent contractors and self-employed individuals can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders. Other regulated lenders will be available to make these loans as soon as they are approved and enrolled in the program,” according to treasury.gov.
In order to apply for a loan you can visit www.sba.gov to find a participating lender. This program will continue through June 30, 2020, but bear in mind that there is a cap on the total amount authorized by the government, so if this is something you are considering, timing is crucial as this program is evolving and changing daily.
For further details and application forms please visit the links below.
Sources:
sba.gov [Article] https://www.sba.gov/funding-programs/loans/paycheck-protection-program-ppp
home.treasury.gov [Article] https://home.treasury.gov/system/files/136/PPP%20Borrower%20Information%20Fact%20Sheet.pdf