Paycheck Protection Program
02 Apr 2020
The Coronavirus Aid, Relief, and Economic Security (CARES) Act allocated $349 billion to the Paycheck Protection Program to keep workers employed during the pandemic and economic downturn. The initiative provides 100% federally guaranteed loans to small businesses that may be forgiven if borrowers maintain their payrolls during the Covid19 crisis.
WHO IS ELIGIBLE?
- Businesses in operation as of February 15, 2020 with 500 or fewer employees. Includes non-profits, veterans organizations, tribal business concerns, sole proprietorships, independent contractors, and eligible self-employed and independent contractors.
- Affiliation rules may preclude some businesses from being considered “small.” Click here for additional information.
- Affiliation rules are waived for business concerns that employ 500 employees or less per physical location and is assigned a NAICS code beginning with 72.
WHAT ARE THE LOAN TERMS?
|Maximum Loan Amount||Average monthly payroll costs x 2.5, limited to $10 million|
|Interest Rate||0.50% Fixed rate|
|Loan Term||Two years|
|Payment Deferral||Six Months|
WHAT EXPENSES COUNT AS PAYROLL COSTS?
|Included Payroll Costs||Salary, wages, commissions or similar compensation; payment of cash tip or equivalent; vacation, parental, family, medical, or sick leave; allowance for dismissal or separation; group health benefits; retirement benefits; and State of local taxes assessed on employee compensation.
|Excluded Payroll Costs||Compensation for any employee over $100.0 thousand, prorated for the covered period; excluded payroll taxes, railroad retirement taxes, and income taxes; compensation for employees whose principal residence is outside of the US; and qualified sick and family leave for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act.
OVER WHAT PERIOD IS AVERAGE MONTHLY PAYROLL CALCULATED?
|Businesses in Operation February 15, 2019 – June 30, 2019||April 1, 2019 – March 31, 2020|
|Businesses not in Operation February 15, 2019 – June 30, 2019||January 1, 2020 – February 29, 2020|
|Seasonal Businesses||February 15, 2019 – June 30, 2019 or March 1, 2019 – June 30, 2019 (selected by borrower)|
WHAT CAN THE LOAN PROCEEDS BE — USED FOR?
Payroll costs, including benefits; interest on mortgage obligations that were incurred before February 15, 2020; rent expense on lease agreements in force before February 15, 2020; and utilities that were in service before February 15, 2020.
HOW MUCH OF THE LOAN IS FORGIVABLE?
- Borrowers will be eligible for loan forgiveness on amounts spent on payroll costs, mortgage interest, rent, and utilities during the 8-week period following loan origination
- The amount of loan forgiveness will be reduced if you reduce full-time employee count or if you decrease salaries and wages by more than 25% for any employee that makes less than $100,000, prorated for the covered period. Note that businesses can include employee compensation up to the $100,000 cap.
- Treasury has also noted that due to likely high demand for the program, at least 75% of the forgiven loan amount must be used for payroll in order to receive the maximum forgiveness.
WHEN CAN YOU APPLY?
April 3, 2020 (April 10, 2020 for Self-Employed and Independent Contractors).
WHERE CAN YOU APPLY?
Any existing SBA approved lender. It is recommended to start with your current bank.
WHERE CAN I FIND THE LOAN APPLICATION?