SBA LOAN: Payroll Protection Program
Loans designed specifically to protect the employees in a time of crisis.
by: Peter Stathapoulos
The below points are a summary put together by GPP’s Government Relations Chair, Peter Stathapoulos and detail the qualifications for the new program provided by the Small Business Administration. We’ve seen many companies resort to layoffs and furloughs because of halted revenue streams. With options like the one explained in this program employers of small businesses may apply for forgivable loans to substitute this loss.
The Following Will Apply:
- Subject to exceptions for the hotel industry, small (less than 500 employees at one location) employers may apply for forgivable loans up to 2 times average monthly payroll costs from 2019, up to $100,000 of payroll costs per employee
- Loans are non-recourse (bank can’t try to collect from owners of business) and require no collateral and no application fees
- Loans are forgivable to extent that the money is spent on qualified costs during the covered period (February 15, 2020 through June 30, 2020) and employer maintains 2019 average payroll levels
- Loan proceeds can be used on payroll, rent, mortgage and other preexisting debt, and utilities
- Up to 100% of loan principal can be forgiven
- Remainder is payable at 0.5% interest and a term of up to 10 years
- There is an automatic forbearance on loan payments during the first six months of the loan
- Program is available to non-profits
- The loan can also be claimed by self-employed individuals and sole proprietorships; not clear whether payments to independent contractors count as payroll costs
- Loan applications for traditional employers go live April 3, 2020
- Further guidance and loan applications for sole proprietorships go live April 10, 2020
Takaways:
- Paycheck Protection Program SBA loan applications go live with lenders April 3rd for traditional employers. Loan applications and further guidance regarding sole proprietors will be issued on April 10, 2020 by Treasury and SBA.
- Many accounting firms are assisting their clients with these applications and with loan forgiveness calculations and documentation. Members should check with their accounting firms for help.
