Small Business Administration Paycheck Protection Program
The new Paycheck Protection Program will help small businesses keep their workforce employed during the Coronavirus (COVID-19) crisis.
The latest legislation reauthorizes another round of PPP until March 31, 2021. The program’s lending authority has also been increased to $806.5 billion with $284.5 billion in new funds appropriated for the SBA to guarantee first and second round loans. Of that $284.5 billion, specific carve outs have been delineated as follows:
- At least $35 billion for first loans to entities that haven’t received one.
- At least $15 billion for first loans to entities with 10 or fewer employees and for first loans of $250,000 or less issued to entities in low- or moderate-income areas. At least $25 billion has also been set aside for second loans to entities that meet that criteria.
While the program has been extended until the end of March, it is important to remember that these funds could be exhausted before then based on demand.
What will this do for me? The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.
Who can apply? This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by coronavirus/COVID-19. Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries. Small businesses in the hospitality and food industry with more than one location could also be eligible if their individual locations employ less than 500 workers.
How do I apply? You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program.
- Click HERE to find lenders near you that are eligible to issue a loan under the Paycheck Protection Program.
- If you want to start preparing your application, you can download a copy of the PPP borrower application form to see the information that will be requested from you when you apply with a lender.
What are the loan details/forgiveness? Another change to the program is that PPP borrowers can now choose a loan forgiveness period ranging from eight to 24 weeks. The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees. Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease. This loan has a maturity of 2 years and an interest rate of 1%.
Simplified Forgiveness Process: Businesses that receive PPP loans of less than $150,000 can now submit a simplified application for forgiveness that includes limited documentation.
That application must include a description of the number of employees retained as a result of the loan, the estimated total amount spent on payroll, the total loan amount, and the borrower must attest they accurately provided required certification and complied with PPP requirements.
What if I work at a private club and am not currently covered under the CARES Act? Through its Main Street Lending Program, the Federal Reserve will purchase loans made by banks to small and mid-sized businesses. The program offers 4-year loans to eligible businesses, which include those with fewer than 10,000 employees or $2.5B in 2019 revenues. Importantly, while these loans offer a one-year deferral of interest and principal payments, the loans are not forgivable and must be repaid. Under the program, eligible banks may extend new loans to eligible businesses or increase the size of existing loans. Many of the program’s details are not finalized, such as whether or not (c)(6)s and (c)(7)s are eligible, but the current presumption is that they will be eligible. If you are interested in applying, contact your financial provider. Eligible lenders include U.S. insured depository institutions, bank holding companies, and savings and loan holding companies. Click here for further guidance if you are in this situation.
For more information, please visit the Small Business Administration’s (SBA) Paycheck Protection Program website.