As a result of the $2 trillion stimulus package known as the Coronavirus Aid, Relief, and Economic Security Act (or the ‘‘CARES Act”), the Paycheck Protection Program (PPP) provides small businesses with funds to pay up to eight weeks of payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities. Today, the U.S. Treasury released the actual application, the dates of when the application process will begin, and guidance on the PPP.
Small businesses with 500 or fewer employees — including nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors — are eligible. Businesses with more than 500 employees are eligible in certain industries.
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.
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.
Starting April 3, 2020, small businesses and sole proprietorships can apply. Starting April 10, 2020, independent contractors and self-employed individuals can 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.
All loans will have the same terms regardless of lender or borrower. Whether you plan on taking out a disaster loan or a 7(a) loan, if you have a relationship with a bank in your community, you should ask your banker if they are an SBA authorized lender. To see a complete list of current SBA lenders in Louisiana, click HERE. Small businesses are also advised to ask their current bank if they are able to offer immediate bridge loan assistance or defer existing loan payments.
A list of participating lenders as well as additional information and full terms can be found at www.sba.gov.
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