Paycheck Protection Program (PPP Loan)

Many small businesses are familiar with or have heard of the PPP Loan Program.  The CARES Act established this temporary program, along with several others, for retaining employees by expanding the traditional SBA 7(a) loan program. The loan will be fully forgiven if the funds are used for payroll costs and other misc costs according to the SBA.gov guidelines. These requirements are changing constantly, please see link below for additional information and a complete listing of guidelines and requirements.

Who can apply?

 The following entities affected by Coronavirus (COVID-19) may be eligible:

• Any small business concern that meets SBA’s size standards (either the industry based sized standard or the alternative size standard)

• Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or Tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:

  • 500 employees, or

  • That meets the SBA industry size standard if more than 500

• Any business with a NAICS Code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location

• Sole proprietors, independent contractors, and self-employed persons

Loan Details & Forgiveness:

 The loan will be fully forgiven if the funds are 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.

This loan has a maturity of 2 years and an interest rate of 1%.

AS OF 6/3/20, PROPOSED CHANGES COMING TO THE FORGIVENESS REQUIREMENTS:

• Current PPP borrowers can choose to extend the eight-week period to 24 weeks, or they can keep the original eight-week period. New PPP borrowers will have a 24-week covered period, but the covered period can’t extend beyond Dec. 31, 2020. This flexibility is designed to make it easier for more borrowers to reach full, or almost full, forgiveness.

• Under the language in the House bill, the payroll expenditure requirement drops to 60% from 75% but is now a cliff, meaning that borrowers must spend at least 60% on payroll or none of the loan will be forgiven. Currently, a borrower is required to reduce the amount eligible for forgiveness if less than 75% of eligible funds are used for payroll costs, but forgiveness isn’t eliminated if the 75% threshold isn’t met.  

• Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by Dec. 31, a change from the previous deadline of June 30.

• The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020, levels due to COVID-19 related operating restrictions.

• New borrowers now have five years to repay the loan instead of two. Existing PPP loans can be extended up to 5 years if the lender and borrower agree. The interest rate remains at 1%.

• The bill allows businesses that took a PPP loan to also delay payment of their payroll taxes, which was prohibited under the CARES Act.

If you are still in need of funding, we know of banks that have funding for the PPP Loan - Call us today for recommendations!

For additional information, please click the link below to the SBA site below:

https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program