What You Need to Know About the Paycheck Protection Program

03
April 2020
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The Paycheck Protection Program (PPP) is designed to do just that: providing an SBA-backed loan to help businesses keep their workforce employed, rents paid, and the utilities on.

Many business owners have wondered how and when they can apply for the PPP. Here are answers to your biggest PPP questions.

What is the Small Business Paycheck Protection Program?

The Paycheck Protection Program provides small businesses with funds to pay up to 8 weeks of payroll costs (including benefits). PPP funds can also be used to pay mortgage interest, rent, and utilities.

Where Can I Apply?

You can apply for the Paycheck Protection Program at any existing SBA 7(a) lender or through any federally insured bank, credit union, or lending institution that is an approved lender under the Small Business Association (SBA).

Thousands of banks participate in SBA lending programs, including community banks. Contact your bank as soon as possible to determine if they are an eligible SBA lender.

When Can I apply?

PPP loans are scheduled to be available for small businesses and sole proprietors starting April 3, 2020 until June 30, 2020.

Independent contractors and self-employed individuals can apply starting April 10, 2020 until June 30, 2020.

There is a funding cap for the PPP loans, which will be granted on a first come, first served basis. All small businesses thinking of applying for the PPP loan are encouraged to act quickly.

Who is Eligible for the PPP Loan?

Small businesses that employ 500 employees or fewer are generally eligible for the PPP loan. This includes sole proprietors, independent contractors, gig economy workers, and self-employed individuals. It also includes nonprofits, veterans organizations, and tribal concerns.

Businesses with more than 500 employees may be eligible in certain industries.

What is the Maximum Amount I Can Borrow?

You can borrow up to 2.5x your average monthly payroll expenses up to $10 million.

This amount is intended to cover 8 weeks of payroll expenses, however, payroll costs will be capped at $100,000 annualized for each employee.

How Can I Use the Funds?

The PPP loan can be used for:

  • payroll costs, including benefits
  • interest on mortgages existing before February 15, 2020
  • rent under leases existing before February 15, 2020
  • utilities which began service before February 15, 2020

Can the Loan be Forgiven?

The purpose of the Paycheck Protection Program is to help you retain your employees, at their current base pay. If you keep all your employees, the entirety of the loan will be forgiven.

The amount of the loan that may be forgiven is equal to the sum of expenses for payroll, and existing interest payments on mortgages, rent payments, leases, and utility service agreements.

At least 75% of the loan must be used for payroll purposes, and not more than 25% of the forgiven amount may be for non-payroll costs (interest on mortgage, rent payments, leases, and utilities).

Payroll costs include employee salaries, up to an annual rate of pay of $100,000, hourly wages and cash tips, paid sick or medical leave, and group health insurance premiums.

If you lay off employees, the forgiveness will be reduced by the percent decrease in your number of employees. If your total payroll expenses on workers making less than $100,000 annually decreases by more than 25%, loan forgiveness will be reduced by the same amount.

If you have already laid off some employees, you can still be forgiven for the full amount of your payroll cost if you rehire your employees by June 30, 2020.

When are Loan Payments Due?

Loan payments will also be deferred for six months. No collateral or personal guarantees are required, and neither the government nor lenders will charge small businesses any fees.

Ask Your Bank or Lender Today About a PPP Loan

Contact your bank or lending institution to find out if they are eligible to take Payment Protection Program loan applications so you can get the funds you need to keep your business afloat during this unprecedented pandemic period.

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