Given the state of our fragile economy in the United States, it is no wonder that a bipartisan bill was recently signed by the president aimed at protecting and supporting businesses across the nation.
This month, U.S. lawmakers agreed on the passage of a $2 trillion stimulus bill called the CARES (Coronavirus Aid, Relief, and Economic Security) Act to blunt the impact of an economic downturn set in motion by the global coronavirus pandemic. On March 27, 2020, President Trump signed the bill into law.
What is the Payroll Protection Program?
A major portion of this law is the $349 billion funded under the Small Business Administration (SBA)—Business Loans Program Account. It is intended to provide loans to businesses to guarantee eight weeks of payroll and other costs to help those businesses remain viable and allow their workers to pay their bills.
This Payroll Protection Program is intended to be a massive federal stimulus bill in the wake of the unsettled economic position our country finds itself in. Here are the few of the ways that this program can work for your business.
If your small business is on shaky ground and meets the qualifications for the program, you can apply directly online under the existing SBA 7(a) loan program.
Who Can Apply?
The following entities affected by Coronavirus (COVID-19) may be eligible:
- Any small business concern that meets SBA’s size standards
- 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.
For more detailed eligibility instructions check out the link to the SBA.
What Could It Provide?
The Paycheck Protection Program, available starting April 3, 2020 and going through June 2020, could provide forgivable loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.
If your company qualifies, loan payments will 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. This loan has a maturity of 2 years and an interest rate of 1%.