The Paycheck Protection Program for Small Businesses

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Program for Small Businesses
The Paycheck Protection
Here is a handy guide on what is the Paycheck
Protection Program and it can help small
businesses in the coronavirus pandemic
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President Donald Trump has passed the CARES bill
of 2 trillion Coronavirus Stimulus Package into
law on Friday, March 27th as support for the U.S.
economy that has affected by the Coronavirus
outbreak. The CARES Act includes different
support options for businesses and employees
including a Paycheck Protection Program, Direct
payments to taxpayers, unemployment benefits, and
small business financing to struggling
entrepreneurs nationwide. The purpose of this
Coronavirus Stimulus Package is to provide
financial support to small businesses.
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Paycheck Protection Program (PPP) Loans
Under the Paycheck Protection Program, the U.S.
Small Business Administration (SBA) will provide
a 350 billion to businesses with less than 500
employees. The purpose of the Paycheck Protection
Program loan is to assist small businesses in
maintaining their payroll costs during the
Coronavirus pandemic.
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This cash-flow assistance will be made via 100
percent federally guaranteed loans to businesses
that maintain their payroll during the
Coronavirus outbreak. The loans will be excused
for those businesses that maintain their payroll
and employees job. This orderly will help
affected businesses and the economy to overcome
quickly after the crisis. The salient features of
the Paycheck Protection Program include
forgiveness of up to 8 weeks of payroll based on
employee retention and salary levels, no SBA
fees, and at least six months of deferral. If
your business is affected by COVID-19 between
February 15, 2020, and June 30, 2020, you can
apply for PPP loans. These loans are available
through June 30, 2020. You dont have to visit
government institutions to apply as thousands of
banks already participate in the SBAs lending
programs. Simply call your bank or look for
SBA-approved lenders online. You can also apply
for an SBA loan directly via the SBA website.
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How to Apply for PPP loans
You can make a loan application to all current
SBA 7(a) lenders. The Department of Treasury will
also be in charge of authorizing new lenders,
including the alternative lenders. The loan
application deadline is June 30th, 2020.
Applicants can apply for the PPP loan on the SBA
website or Click here to access the application
form.
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The Loan Terms and Interest Rate
The maximum loan term is 10 years with a maximum
interest rate of 4 percent for any amounts not
forgiven without any loan fees and prepayment
fees. However, the SBA will establish application
fee caps for lenders.
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Paycheck Protection Program Loan Amount
Calculation
The PPP loan size is calculated based on a
business situation. The maximum loan amount
available is 10 million. Examples of loan
calculations For businesses affected during
February 15, 2019 June 30, 2019, the maximum
loan equates to 250 percent of your average
monthly payroll costs during that time range. For
businesses with seasonal workers, you can opt to
choose March 1, 2019, as your time period start
date. For businesses not in this time range, the
maximum loan equates to 250 percent of your
average monthly payroll costs between January 1,
2020, and February 29, 2020. For businesses that
want to refinance an already taken out Economic
Injury Disaster Loan (EIDL) into PPP loan, they
can add the outstanding loan amount to their
payroll sum.
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Costs covered by the Paycheck Protection Program
The following costs are covered by the PPP
loan Salary, wages, commission, and similar
compensation Cash tips or equivalent Payment for
sick leave, medical, vacation, or
family Dismissal or separation allowances Group
health care benefits, such as insurance
premiums Retirement benefit payment Payment of
taxes evaluated on the employees compensation
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The Eligible Criteria for Paycheck Protection
Program
Any nonprofit, tribal business concern,
self-employed individual, independent contractor
and sole-proprietor that fulfills the SBAs
standard business size definition and veterans
organizations organized under 501(c)(19) with
fewer than 500 employees are eligible to apply
for small business loans under the Paycheck
Protection Program. The business needs to be
operational as of Feb. 15. According to a fact
sheet published by the U.S. Chamber of Commerce,
the 500-employee cap is applied on a
per-physical-location basis for food servicing
businesses. If you submit deceitful information
to apply for the loans, you will be charged with
criminal penalties of up to 1 million.
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The Use of the Loan Proceeds
The loan proceeds can be used for the following
costs Payroll costs The continuation cost of
group health care benefits during periods of paid
sick, medical, or family leave, Any insurance
premiums Salaries, commissions, or similar
compensations Interest payments on mortgages
(excluding prepayment or payment of principal on
a mortgage debt) Rent and utilities Interest on
any other debt obligations that were incurred
before Feb. 15, 2020
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How PPP Loans Match with SBAs Existing Loans
You can apply for PPP loans with other SBA loan
programs, such as Economic Injury Disaster Loans
(EIDLs), SBA 7(a) loans, SBA 504 loans, and SBA
microloans as well as investment capital from the
Small Business Investment Corporations (SBICs).
You cannot use a PPP loan for the same purpose as
your other SBA loans particularly during the
covered period of February 15, 2019 June 30,
2019.
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The Documentation Requirement for PPP Loans
You need to have the following in place to apply
for PPP Loans Basic business information Business
NTN number Average monthly payroll The number of
jobs your business supported The purpose of using
the loan proceeds List all owners that hold 20
percent ownership (and confirm they are not
involved in federal crimes) Employees over time
and payroll costs.
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Can the loan be forgiven?
The PPP loan includes loan forgiveness covering
costs for the first eight weeks of the loan for
businesses to keep employees on payroll or
continue paying bills throughout the COVID19
outbreak. The forgiven amount will also include
payroll costs for individuals below 100,000 in
annual income, mortgage, and rent obligations.
The total amount can be reduced if employees
wages are reduced. If you have to lay your
employees off due to economic conditions, you can
still preserve some of your loan guarantees by
hiring them back. If you need more details on the
Paycheck Protection Program, read it here
in detail in an FAQ here. You can also find more
details on SBA support during Coronavirus on
the SBA Coronavirus resources page.
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