On April 3, 2020, the Small Business Administration (“SBA”) began accepting applications for Paycheck Protection Program (“PPP”) loans for small businesses and sole proprietorships authorized by the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. Independent contractors and self-employed individuals can apply beginning April 10, 2020.
The PPP authorized up to $349 million in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. Loan payments will be deferred for 6 months and no collateral or personal guarantees are required. There are no fees under the PPP. Loans will mature in 2 years with an interest rate of 1%. Under the program, loans will be forgiven provided:
- The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8 week period after the loan is made; and
- Employee and compensation levels are maintained.
Who Qualifies? All businesses with fewer than 500 employees can apply provided that it was in business on or before February 15, 2020. It also includes certain nonprofits, tribal groups and veteran groups. Businesses in certain industries may be eligible if they have more than 500 employees provided they meet applicable SBA employee-based size standards for those industries. Further information can be found on the SBA website.
How Much Can You Qualify For? Loans can be for up to two and a half times a company’s average monthly payroll expenses (based on the 12 months preceding the loan), subject to a $10 million cap. Individual employee salaries are capped at $100,000 (pro-rated per month).
What is a Payroll Expense? Payroll expenses include salaries, wages, or commissions; cash tips; payment for leave; dismissal or separation allowances; group health care benefits payments (including insurance premiums); retirement benefit payments; state or local tax on the compensation of employees.
Documentation and Certification Applicants will be required to submit payroll documentation. Applicants will also be required to certify that the current economic uncertainty makes the loan request necessary to support ongoing operations.
For further information regarding the PPP or other relief options you can access the SBA Website.
If you have additional questions regarding the application process or other relief measures, our offices across the country are standing by to assist.