The Paycheck Protection Program, the largest component of small business relief included in the $2 trillion CARES Act, was put on pause after overwhelming demand due to the widespread impact of the coronavirus pandemic. However, a second round of funding consisting of $310 billion was recently approved by Congress, and the SBA is expected to begin accepting applications as soon as Monday.
Let’s break down what the PPP is, who can receive the funding, and how to apply so you can receive a loan when it’s back open for business.
Remember, this is not official legal advice. If you have questions or concerns about the guidelines of the PPP, it’s best to consult an attorney or financial advisor.
What is the Paycheck Protection Program?
The Paycheck Protection Program is a small business relief program aimed at providing businesses in the U.S. with eight weeks of funding assistance through federally guaranteed loans backed by the Small Business Administration.
The forgivable loans program depends on payroll costs and covers employees earning up to $100,000 per year. You can apply for 2.5 times your cost of payroll, and you can use the funds for payroll and other operational expenses between the timeframe of February 15 and June 30, 2020.
Who is eligible for a Paycheck Protection Program loan?
Businesses with 500 or fewer employees, as well as non-profits, independent contractors, and the self-employed, who have been impacted by COVID-19 are eligible for the loan program.
To show you have experienced a negative impact, there is a section on your Paycheck Protection Program application where you will need to certify that “current economic uncertainty makes the loan request necessary.”
How can my loan be forgiven?
You don’t have to pay the Paycheck Protection Program loan back if you use it to cover payroll costs, mortgage interest, rent, and utility costs. You must also maintain all employees and compensation levels.
You’ll need to submit a request for loan forgiveness from your SBA lender. In the request, be sure to document:
- The number of full-time employees you have
- Pay rates for all employees
- Payments on an eligible mortgage or lease
- Utility payments
Your lender will have 60 days to reply to your request. The forgiveness won’t go into effect until the eight-week period after you receive your loan ends.
Note: Any amount that is not forgiven will be treated as a two-year loan with a 1% fixed interest rate. The government defers all payments (principal, interest and fees) for 6 months; however, the loan will accrue interest over this period.
How do I apply?
You can apply for the Paycheck Protection Program through any lender approved by the SBA. For many businesses, you’ll be able to work with your bank. For businesses whose banks are not processing PPP loans, you’ll need to find another lender. The SBA provides a list of all approved lenders. Homebase has also identified several lenders through which you can submit an application now (and pay no fees for applying).
While the SBA will not start processing new PPP loan applications until Monday, April 27, you can complete your application now so that it is ready to go when the SBA is ready to receive and review applications. Many expect this round of funding to go as quickly as the first.
Remember, this is not official legal advice. If you have questions or concerns about the guidelines of the PPP, consult an attorney.