The Paycheck Protection Program for Small to Medium Sized Businesses
The Coronavirus Aid, Relief, and Economic Security (CARES) Act was recently passed to provide emergency relief for small- to medium-sized businesses disrupted by COVID-19. The Act created the Paycheck Protection Program, which will serve as an extension of the Small Business Administration (SBA) 7(a) loan program, allowing financial institutions to provide federally-backed, forgivable loans to eligible businesses.
SBA “Paycheck Protection Plan” (or PPP) will be available and open for applications beginning Friday, April 3, 2020. Applicants can follow the instructions on-line and can work with their local bank. Wages and expenses could be eligible for low interest loans with the potential that these loan may also be grant eligible (meaning you don’t need to re-pay). This is the link people need to access in order to have their questions answered and to determine eligibility. Please follow these links below for more information and to download the application.
https://www.sba.gov/funding-programs/loans/paycheck-protection-program-ppp
https://www.sba.gov/document/sba-form–paycheck-protection-program-ppp-sample-application-form
Paycheck Protection Program Provisions:
- Available to small- and medium-sized businesses with less than 500 employees (subject to limited exceptions), including 501(c)(3) nonprofit organizations, 501(c)(19) veterans organizations, and/or Tribal businesses.
- Loan proceeds may only be used for specific expenses, such as payroll costs, utilities, mortgage interest, rent/lease payments, group healthcare benefits, interest on existing debt, and other approved efforts to retain employees.
- Maximum loan size is up to 2.5 times average monthly payroll costs over the prior 12 months for most businesses, or over a more targeted period for seasonal businesses, but may not exceed $10 million.
- Paycheck Protection Program loans do not require a personal guarantee nor collateral.
- All or a portion of the loan may be forgiven.
- The amount of forgiveness is calculated as the sum of amounts paid in the eight weeks following loan origination for: a) Payroll, b) mortgage interest, c) rent and d) utilities.
- Borrowers will not be charged any participation fees or pre-payment fees.
- Balances remaining after loan forgiveness will have a max maturity of 10 year.
- Loan and interest payments are deferred for at least 6 months but no more than 1 year.
- Impacted businesses may only receive one Paycheck Protection Program loan.
- All eligible entities impacted by COVID-19 between February 15, 2020 and June 30, 2020 may apply.
- Loans will be available through June 30, 2020, although program funding limitations may impact loan availability for those businesses applying later in the availability time-frame.
This information is preliminary and is subject to change.
