Covid-19 Emergency Paycheck Protection Program for Businesses
The details are still being worked out by the Federal government, Small Business Association and the US Treasury Department.
This is the program as I understand it to be. Check the references provided for updated information and please consult with your legal, financial and tax advisors regarding this program, as the program specifics may change.
The CARES Act
The Senate and White House officals agreed, on March 25, to a $2 Trillion emergency relief package to mitigate the economic disaster created by the coronavirus Covid-19 outbreak. President Donald Trump signed into law on March 27.
This bill allocates money to be paid directly to American taxpayers, for healthcare, and to provide economic releif to small business owers that are suffering an economic downturn because of the coronavirus emergency. Funding for small businesses is through the Payroll Protection Program (PPP) are funded through the SBA via local banks and lenders.
Aside from the PPP, there is an additional 10 billion dollars available through the SBA’s Economic Injury Disaster Loan Program (EIDL) which includes emergency grants for small businesses.
Currently there are 1800 banks and lenders expected to participate in the Payroll Protection Program (PPP) across the United States. If your bank is not participating in the PPP you can find a lender here.
The Payroll Protection Program
The Payroll Protection Program (PPP) is the stimulus package directed through the SBA o provide relief to small business owners hurt by the coronavirus Covid-19 emergency. The purpose of the PPP is to keep their employees on the business payroll. The SBA program has 376 billion dollars in funding. Essentially, this is a business loan that has the potential to be either partially or fully “forgivable”.
*I have seen stimulus funding ranges between $349 and 376 Billion.
For the loan to be forgivable, partially or fully, the money must be used for qualifying expenses by the business. Qualifying expenses include payroll, rent, mortgage, and utilities for the following 8 weeks after the date the loan has been made. Supporting documentation must be provided.
To qualify for this PPP loan, a business must have 500 or less employees. Businesses also include individuals that are sole proprietors, self-employed and independent contractors, as well as non-profit and veterans organizations.
The SBA may change the maximum number of employees if they meet SBA’s size standard for some industries
The loan has an interest rate of 1% and a maturity of 2 years. The loan has 6 month payment deferment. No collateral or personal guarantees are required for the loan. You do, however, need to confirm that it is because of the Covid-19 emergency, that this money is needed to continue business operations.
Apply for the PPP Loan
To download the application for the PPP loan go here. Neither the government or the lending institution will charge a fee for the loan. Lenders are allowed to start taking loan applications for small businesses and sole proprietorships beginning April 3, 2020. Independent contractors and self-employed individuals can apply for a loan starting April 10, 2020. Applications will be accepted until June 30, 2020.
I would recommend filing your application as soon as possible. When the SBA 376 billion dollar funding is depleted there will be no money to make additional loans.
Generally, the maximum amount of the loan will be 2.5X your monthly payroll cost, up to 10 million dollars. The average monthly payroll ought to be calculated using the prior year’s payroll. Payroll cost includes salary, wages, commissions, health care benefits and retirement benefits.
The SBA has a new 24/7 phone help line: 1–800–659–2955
Applying For Loan Forgiveness
The loan will be deferred for 6 months before any payment is due. This allows adequate time to submit a request to the lender that is servicing the loan for forgiveness. You will need to supply documentation that will verify the number of employees and their pay rates as well as payments on other qualifying expenses.
The lender must make a decision on the forgiveness within 60 days.
EIDL $10,000 Grant
The Economic Injury Diseaster Loan Program and Advance (EIDL), is an existing program that has been given $10 billion dollars from the stimulus program. The program offers a $10,000 grant, or emerency advance, that does not have to be paid back.
Businesses and non-profits can apply for the EIDL directly. You can apply for the EIDL grant here.