5 Quick Facts About the Paycheck Protection Program Loan

As of July 1, the U.S. Small Business Administration (SBA) had given out roughly $521 billion of the Payment Protection Program’s allocated $659 billion. This means that approximately $138 billion remains. In summary, The Paycheck Protection Program (PPP) is an important section within the recently passed Coronavirus Aid, Relief and Economic Security Act (CARES) Act that allocates money to small businesses to help employers keep workers on payroll and offer critical support during the pandemic. The PPP resumed accepting applications July 6, 2020, in response to the President signing the program’s extension legislation. The new deadline to apply for a Paycheck Protection Program loan is August 8, 2020,

Here are 5 quick facts people should know about the PPP Loan as it has reopened.

  1. A variety of businesses are accepted

Any small business with 500 or fewer employees may be eligible. This includes small businesses, S corporations, C corporations, LLCs, private nonprofits, faith-based organizations, tribal groups and veteran groups, and even restaurants and hospitality groups that fall under 500 employees. Ag-related industries such as food and fiber, ranching and raising of livestock, aquaculture, and all other independently owned farming and agriculture-related entities are also eligible to participate in the program.

  1. Where can I get PPP Loans?

PPP Loans can be obtained only through authorized SBA Act Section 7(a) Lenders that “opt in” to the program and certain other lenders authorized by new SBA regulations, including any federally insured depository institution or credit union and any Farm Credit System institution (Lenders). The application is available online and will be processed on a “first-come, first-served” basis.

  1. The amount you can borrow depends on your immediate payroll history.

The maximum amount of money you can borrow through the PPP is equal to 2.5 times your average monthly payroll costs or $10 million, whichever is lower. This excludes compensation in excess of $100,000 per employee. If your business is seasonal, the guidance from the SBA Dated April 7, 2010 states, “In evaluating a borrower’s eligibility, a lender may consider whether a seasonal borrower was in operation on February 15, 2020 or for an 8-week period between February 15, 2019 and June 30, 2019.”

  1. The PPP Loan Forgiveness is extended

After hearing small business owner concerns, lawmakers have passed a bipartisan bill called the Paycheck Protection Program Flexibility Act of 2020 to make the PPP easier to use and get forgiven. Borrowers will have their loans forgiven if they use the money for designated expenses. Participants are eligible for loan forgiveness for the amounts spent on authorized expenses over 24 weeks after loan disbursement (or eight weeks if they choose).

  1. Still, at least 60% of your loan must be used for payroll costs. 

The Act states that “To receive loan forgiveness under this section, an eligible recipient shall use at least 60 percent of the covered loan amount for payroll costs, and may use up to 40 percent of such amount for any payment of interest on any covered mortgage obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation), any payment on any covered rent obligation, or any covered utility payment.” Payments to independent contractors cannot be included in the payroll costs. Your forgivable amount will scale in proportion to the amount you spend on payroll, up to the total loan amount.

  1. 6. To get the entire amount of the loan forgiven, you must meet two criteria.

Assuming that at least 60% is spent on payroll and the rest on permitted expenses, the full-time employee headcount cannot decline from average monthly levels during 2019 or during the past 12 months. In addition, for loans to become full grants, employers cannot cut salaries or wages. If they do, the forgiven amount will be reduced.

 

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