Q: What is the Paycheck Protection Program?

A: The Paycheck Protection Program (PPP) authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. The PPP is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act that was signed by the president on March 27, 2020.

Q: How do I know whether I am eligible?

A: Generally, all businesses with 500 or fewer employees can apply.

Q: What are the basic terms of the loan?

A: You may apply for one loan only. All loan terms will be the same for everyone. The basic terms are as follows:

• Amount: Loans can be for up to two months of your average monthly payroll costs from the last year plus an additional 25% of that amount. That amount is subject to a $10 million cap. There will be different applicable time periods for your calculation if you are a new business.
• Interest: 1% fixed rate
• Term: 2 years
• Payment deferral: All payments are deferred for six months; however, interest will continue to accrue over this period.
• Prepayment penalty: No
• Collateral and/or personal guarantee required: No

Q: What must the loan be used for to be forgiven?

A: The loan proceeds must be used over the eight-week period after the loan is made and be used to cover the following costs:

• Payroll
• Interest on mortgage obligations that were incurred before Feb. 15, 2020
• Rent under lease agreements in force before Feb. 15, 2020
• Utilities for which service began before Feb. 15, 2020

Not more than 25 percent of the forgiven amount should be used for nonpayroll costs.

Q: What is included in payroll costs?

• Salary, wages, commissions or tips (capped at $100,000 on an annualized basis for each employee)
• Employee benefits including costs for vacation, parental, family, medical or sick leave; allowance for separation or dismissal; payments required for the provisions of group healthcare benefits including insurance premiums; and payment of any retirement benefit
• State and local taxes assessed on compensation
• For a sole proprietor or independent contractor: wages, commissions, income or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee

Q: How does loan forgiveness work?

A: You will need to submit a request to your lender that includes documentation verifying the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease and utility obligations. Your loan will be forgiven if you use the loan for payroll costs, mortgage interest, rent and utilities payments as discussed above. However, your loan forgiveness will be reduced if you decrease:

• Your full-time employee headcount
• Salaries and wages by more than 25 percent for any employee who made less than $100,000 annualized in 2019

You have until June 30, 2020, to restore your full-time employment and salary levels for any changes made between Feb. 15 and April 26, 2020. The lender must make a decision on the forgiveness within 60 days.

Q: How do I apply?

A: Small businesses and sole proprietorships can apply for a loan starting April 3, 2020, and independent contractors and self-employed individuals can apply starting April 10, 2020 – through any existing Small Business Administration lender or through any federally insured depository institution, federally insured credit union or Farm Credit System institution that is participating – by completing the PPP loan application and submitting it with the required documentation. The program is open until June 30, 2020, but there is a funding cap and lenders need time to process your loan.

Loan Application

Existing SBA Lenders

Authorship Credit: Jessica Captain Novick

Source: U.S. Treasury Department Paycheck Protection Program Information Sheet: Borrowers

*Note: Information may change as new regulations and guidance are continually being issued. Please feel free to contact us for the most current information.