Paycheck Protection Program (PPP) FAQs for Small Businesses
Who is Eligible: You are eligible for a loan if you are a small business that employs 500 employees or fewer, or if your business is in an industry that has an employee-based size standard through SBA that is higher than 500 employees. Tribal businesses, 501(c)(19) veteran organizations, and 501(c)(3) nonprofits, including religious organizations, will be eligible for the program. Nonprofit organizations are subject to SBA’s affiliation standards. Independently owned franchises with under 500 employees, who are approved by SBA, are also eligible. Sole proprietors, independent contractors, gig economy workers, and self -employed individuals are all eligible for the PPP.
What is Covered: The amount any small business is eligible to borrow is 250% of their average monthly payroll expenses, up to a total of $10 million. The terms of the loan may differ on a case-by-case basis. However, the maximum terms of the loan feature a 10-year term with interest capped at 4 percent and a 100 percent loan guarantee by the SBA. You will not have to pay any fees on the loan, and collateral requirements and personal guarantees are waived. Loan payments will be deferred for at least six months and up to one year starting at the origination of the loan. This amount is intended to cover 8 weeks of payroll expenses and any additional amounts for making payments towards debt obligations. This 8-week period may be applied to any time frame between February 15, 2020 and June 30, 2020. Seasonal business expenses will be measured using a 12-week period beginning February 15, 2019, or March 1, 2019, whichever the seasonal employer chooses. Additionally, if you took out a State Bridge Loan or an Economic Injury Disaster Loan you can still apply for a PPP Loan, check with your lender for the provisions that may apply.
Where to Apply: You can apply for the PPP at any lending institution that is approved to participate in the program through the existing U.S. Small Business Administration (SBA) 7(a) lending program and additional lenders approved by the Department of Treasury. This could be the bank you already use, or a nearby bank. You do not have to visit any government institution to apply for the program. You can call your bank or find SBA-approved lenders in your area through SBA’s online Lender Match tool. You can call your local Small Business Development Center or Women’s Business Center and they will provide free assistance and guide you to lenders.
When Can I Apply: Applicants are eligible to apply for the PPP loan until June 30th, 2020. The loan is forgiven at the end of the 8-week period after you take out the loan. Borrowers will work with lenders to verify covered expenses and the proper amount of forgiveness. The covered period during which expenses can be forgiven extends from February 15, 2020 to June 30, 2020. Borrowers can choose which 8 weeks they want to count towards the covered period, which can start as early as February 15, 2020. If you took out an Economic Injury Disaster Loan (EIDL) through the SBA loan on or after January 31st, 2020 you may apply to refinance your EIDL loan into a PPP loan. If the full principal of the PPP loan is forgiven, the borrower is not responsible for the interest accrued in the 8-week covered period. The remainder of the loan that is not forgiven will operate according to the loan terms agreed upon by you and the lender.
How It Works: The amount of principal 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. 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. The purpose of the Paycheck Protection Program is to help you retain your employees, at their current base pay. If you keep all of your employees, the entirety of the loan will be forgiven. If you still lay off employees, the forgiveness will be reduced by the percent decrease in the number of employees. You can still be forgiven for the full amount of your payroll cost if you rehire your employees by June 30, 2020.
· Senate Small Business Guide, CAREs Act: https://www.sbc.senate.gov/public/index.cfm?p=guide-to-the-cares-act
· SBA PPP Website: https://www.sba.gov/funding-programs/loans/paycheck-protection-program
· SBA Local Assistance Locator: https://www.sba.gov/local-assistance
· SBA COVID-19 Disaster Assistance: https://www.sba.gov/disaster-assistance/coronavirus-covid-19
Additional Information: SBA PPP Loans will be processed and determined on a case by case basis. It is vital that you make sure that you, your small business, your lender, and any other parties involved are fully informed on the terms and conditions and that you continue to monitor the SBA resources for guidelines and updates.