The Paycheck Protection Program (PPP) is a Small Business Administration (SBA) loan created to help businesses continue to employ their workforce amidst the COVID-19 pandemic.
1. What is this program all about?
PPP provides small businesses with funds to pay up to 8 weeks of payroll costs including certain payroll related benefits. Funds can also be used to pay interest on mortgages, rent, and utilities.
Loan applications can be processed as soon as April 3, 2020, and the program will be available through June 30, 2020.
2. Eligible Small Business and General Terms
Small businesses with 500 or fewer employees - including nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors— are eligible. Businesses with more than 500 employees are eligible in certain industries.
Funds are provided in the form of loans that will be fully forgiven when used for payroll costs, interest on mortgages, rent, and utilities. At least 75% of the forgiven amount must have been used for payroll. Loan payments will be deferred for six months. No collateral or personal guarantees are required.
3. Loan Amount
The maximum loan amount will equal the lesser of:
The average total monthly payments by the applicant for payroll costs incurred during the 1-year period before the date the loan is made, times 2.5.
The outstanding amount of a loan made to the business concern by the SBA in February
If an eligible recipient was not in business in the period from 2/15/2019 – 6/30/2019, the maximum amount will be the average total monthly payments for payroll costs from 1/1/2020 – 2/29/2020, or $10 million.
The outstanding amount on any other SBA loans that were made to an eligible recipient from 1/31/2020, until the enactment of the Paycheck Protection Program will be available to be refinanced under the new covered loan.
4. Loan Repayments, Interest, Conditions for forgiveness
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.
Loan payments will be deferred for six months, and neither the government not lenders will charge small businesses any fees. The loan has a maturity of two years with an interest rate of 1%.
5. How to 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. Consult your bank or local lender as to whether it is participating. All loans will have the same terms regardless of lender or borrower. A list of participating lenders as well as additional information and full terms can be found at www.sba.gov.