Paycheck Protection Program
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 loan amounts will be forgiven as long as:
• 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. Payroll costs are capped at $100,000 on an annualized basis for each employee and not more than 25% of the forgiven amount may be for non-payroll costs. Loan payments will be deferred for 6 months.
You can apply through any existing SBA lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating.
All businesses – including nonprofits, veterans organizations, Tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors – with 500 or fewer employees can apply. Businesses in certain industries can have more than 500 employees if they meet applicable SBA employee-based size standards for those industries.
For this program, the SBA’s affiliation standards are waived for small businesses (1) in the hotel and food services industries (click HERE for NAICS code 72 to confirm); or (2) that are franchises in the SBA’s Franchise Directory or (3) that receive financial assistance from small business investment companies licensed by the SBA.
You will need to complete the Paycheck Protection Program loan application and submit the application to an approved lender by June 30, 2020. You will also need to provide your lender with payroll documentation.
What can I use these loans for? You should use the proceeds from these loans on your:
• Payroll costs, including benefits;
• Interest on mortgage obligations, incurred before February 15, 2020;
• Rent, under lease agreements in force before February 15, 2020; and
• Utilities, for which service began before February 15, 2020.
Payroll costs include:
• 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 health care benefits including insurance premiums; and payment of any retirement benefit;
• State and local taxes assessed on compensation; and
• 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.
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. If you are a seasonal or new business, you will use different applicable time
periods for your calculation. Payroll costs will be capped at $100,000 annualized for each employee.
You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.You will also owe money if you do not maintain your staff and payroll. You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.