The Paycheck Protection Program provides small businesses with funds to pay up to 8 weeks of payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities. Funds are underwritten and funded by local banks and guaranteed by the SBA. The new loan program will be available retroactive from Feb. 15, 2020, so employers can rehire their recently laid-off employees through June 30, 2020. April 2nd updates are highlighted.
Funds are provided in the form of loans that will be fully forgiven when 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.
Must Keep Employees on the Payroll—or Rehire Quickly
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.
All Small Businesses Eligible
Small businesses with 500 or fewer employees—including nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorship, and independent contractors—are eligible. Businesses with more than 500 employees are eligible in certain industries.
All loans under this program will have the following identical features:
- Interest rate of 1.0% (Treasury changed from 0.50% on 4/2/20)
- Maturity of 2 years (Treasury changed from 10 years on 3/31/20)
- First payment deferred for six months
- 100% guarantee by SBA
- No collateral
- No personal guarantees
- No borrower or lender fees payable to SBA
- Loan forgiveness is available
Note: The loan forgiveness amount can be reduced if there is a reduction in the number of employees or a reduction of greater than 25% in wages paid to employees
Note: To have loan amounts fully forgiven, at least 75% of forgiveness amount calculated must be for payroll costs. (This is a NEW requirement from the Treasury as of 03/31/2020.)
When to Apply
Starting April 3, 2020, small businesses and sole proprietorships can apply. Starting April 10, 2020, independent contractors and self-employed individuals can apply. We encourage you to apply as quickly as you can because there is a funding cap.
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. 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. 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. The Paycheck Protection Program is implemented by the Small Business Administration with support from the Department of the Treasury. Lenders should also visit www.sba.gov or www.coronavirus.gov for more information.
Paycheck Protection Program Additional Resources:
VIEW RECORDING of live informational session on PPP with Julie Needs (Executive Director, SOD Center) and WIlliam Dawes (President, Downtown Salem Partnership)