Updated on April 7, 2020
Running your small business amid the global coronavirus pandemic is an enormous challenge, but there is a way out.
We care about your business growth and we’ll always find ways to help through hurdles such as those caused by the coronavirus pandemic.
There’s no doubt that the COVID-19 pandemic is placing a huge strain on small businesses like yours. You have to deal with the dynamic market fluctuations, maintain inventory and meet all payroll needs and adopting the new daily practices to keep your employees and customers safe. Finding balance between all of these factors can be intimidating.
That’s why we want to help you understand the new Paycheck Protection Plan (PPP) included in the recently passed CARES Act plan which provides $376 billion in relief to small businesses and American workers.
What is the Paycheck Protection Plan?
The Paycheck Protection Plan (PPP) provides up to $10million loan for funding payroll needs and handling other expenses including mortgage interests, utilities, rent and interests on other existing business debts from February 15, 2020, to June 30, 2020.
Loans will be offered at an interest rate of 1%. You can defer for six months to one year before you are required to start making payment. However, interests may begin to accrue. Your loan application requires no collateral, prepayment penalties or guarantees. This also means that the normal underwriting requirements will be limited.
The primary goal of this loan is to keep businesses afloat and workers paid (even if not open). It may also be partially or fully forgivable under certain circumstances. Nevertheless, the loans will be due 2 years after applications.
Size of PPP Business Loan
The maximum loan for a lot of people is lesser than the average monthly payroll costs multiplied by 2.5 or approximately $10 million. For self-employed, the maximum loan amount will equal to 2.5 times the net earnings up to $100,000 in one year or $250,000 total. Payroll may include all of the following:
- Commissions, wages, salary or related compensations
- Cash tip or equivalent payments
- Payments for sick leave, medical, family, parental or vacation
- Payments for separation or dismissal allowance
- Payments for retirement benefits, or healthcare benefits such as insurance premiums
- Payments for state or local taxes on employee compensations.
Requirements to qualify for the PPP program?
All businesses with the following criteria are eligible for the PPP program:
- Small businesses with less than 500 employees or over 500 employees where the SBA’s size meets the standard for its industry
- Individuals who operate as independent contractors, or sole proprietor
- Individuals who are self-employed and regularly carry out business or trade
- A 501(c) (3) with fewer than 500 employees
- A 501 (c) (19) Veterans organization within the standard SBA size
- A Tribal business concern within the regular SBA size
- Businesses under Foodservice or Accommodation categories which may use up to 500 employees in each location.
How much of this small business loan can be forgiven?
A portion of this loan under the Paycheck Protection Program will be forgivable. You may not be required to pay back funds used for payroll, rent, utilities and mortgage interest payments made during the eight weeks following receipt of the loan. These forgivable amounts are not also taxable as gross income (unlike some debt forgiveness). It is also possible that some of the loan amounts are used for non-payroll costs. Therefore, no more than 25% of the forgiven amount be used for other non-payroll costs.
For the loans to be fully forgiven, then your business must spend only within the specified intended use for the Paycheck Protection Program and must maintain your current levels of wages and employment.
Your loan forgiveness amount may be reduced if your business fails to keep full-time employee headcount or if you reduce the salaries of your employees by more than 25% of the previous year.
Any changes made in the salary levels of your full-time staff must be restored by June 30, 2020. Portions of the loans not forgiven will have a 4-year interest rate and 10-year amortization period.
Where to access the PPP Small Business Loan?
Over 1800 approved SBA lenders currently offer these loans. Chances are your current bank or lender may offer these loans. You may contact your bank to find out your next step in securing this loan as soon as possible.
We recommend applying as soon as possible to get a share of the $350 billion quotas before it gets exhausted. Thousands of businesses like yours are also after these loans, so the best time to get them is now. You may begin your application for the Paycheck Protection Plan by clicking here.
Because we are committed to supporting you and your business as you tackle the challenges brought on by the COVID-19 pandemic, we’ve also created other resources just for you. Our goal is to be right there with you, guiding, inspiring and motivating as together we fight the pandemic. We’re in this together.