The Pay Check Protection program is great news for small business owners across the United States! In these uncertain times, the capability of staying optimistic may be more challenging than before, however, with the support of the government, we as business owners can keep HOPE alive!
The Paycheck Protection Program (PPP) is covered under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This program authorizes up to $349 billion in forgivable loans to business owners to pay their workers during the COVID-19 pandemic crisis.
The CARES Act offers 3 distinct programs for helping small businesses, including:
- Paycheck Protection Program (PPP)
- Economic Injury Disaster Loans (EIDL)
- Emergency Economic Injury Grants
How does the Paycheck Protection Program (PPP) work?
Who can apply?
- All businesses, including:
- — Nonprofits, sole proprietorships, self-employed individuals, veterans’ organizations, independent contractors, and more.
There are two qualifications:
- You must have 500 or fewer employees
- You must have been in business before February 15th, 2020
The dollar amount that businesses will qualify for depends on:
- Payroll – Payroll consists of all types of compensations including salaries, wages, commissions or tips, employee benefits (i.e. vacation, sick leave, health care, insurance premiums, etc.), state and local taxes on compensations, and more.
- — Calculation tips: take the average monthly payroll expense from 2019 and multiply it by 2.5. For example, 15,000 multiplied by 2.5 equals 37,500
- — Payroll costs are capped at $100,000 on an annualized bases for each employee.
Loan Forgiveness
As stated by the United States Department of Treasury, the loan amounts will be forgiven as long as:
- The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8-week period after the loan is made.
- Employee and compensation levels are maintained
Potential Money Owed
According to United States Department of Treasury, businesses will owe money if there are any:
- Decreases in the number of staff
- Decreases in salaries and wages by more than 25% for employees who make less than $100,000 in 2019
- Increases of restored full-time employment and salary levels that weren’t let go between February 15, 2020 and April 26, 2020.
Loan Deferment
Loan payments will be deferred for 6 months.
Loan Due Date
The loan will be due in 2 years.
However, there are no prepayment penalties or fees if you wish to pay your loan off earlier than 2 years.
Loan Interest Rate
1.00% fixed rate
Application Dates
Small Businesses and Sole Proprietorships — Starting April 3, 2020
Independent Contractors and Self-Employed Individuals — Starting April 10, 2020
Application Checklist
- Completed Paycheck Protection Program loan application
- — Click here for the Paycheck Protection Program Borrower Application Form
- Supporting Documents
- — Tax Documents
- — Payroll Documentation
- — Mortgage Interest or Rent Payment Documentation
- — Utilities Payment Documentation
- Submit the PPP application and documentation material to an approved lender
Lenders
Businesses can apply through any:
- Existing SBA Lender
- Federally Insured Depository Institution
- Federally Insured Credit Union
- Participating Farm Credit System Institution
Loan Proceeds Use
As stated by the United States Treasury, the loan proceeds use is for either of the following:
- Payroll costs
- Interest on mortgage obligations, incurred before February 15, 2020
- Rent, under lease agreements in force before February 15, 2020
- Utilities, for which services began before February 15, 2020
Certify in Good Faith
The United States Department of Treasury wants you to certify in good faith that:
- Your business has been impacted by the current economic uncertainty
- All funds will be used to support the ongoing of operations, retaining workers, maintaining payroll or making mortgage, lease, and utility payments.
- You will provide all supporting verification documents for lenders that are identical, true, and accurate
- You have not or will not receive another loan under the PPP program