The Paycheck Protection Program (PPP)

The Paycheck Protection Program (PPP) is a key section within the recently passed Coronavirus Aid, Relief and Economic Security Act (CARES) Act that allocates $349 billion for small business (< 500 employees) loans to support payroll and certain other expenses. Loans are available for up to 2.5 times of your average monthly payroll during the year preceding the application, with a maximum loan of $10 million. If employers maintain their payroll and use loan funds for allowed expenses like payroll, rent and utilities for the first 8 weeks after the loan is issued, the loan amount is forgiven. The PPP is retroactive to February 15, 2020.

Overview:

• Small Business Loans through local lenders offered to small businesses with fewer than 500 employees

• Self-employed, sole proprietors, freelance and gig economy workers are also eligible to apply (have to be in operation before February 15)

• Loans up to $10 million or 2.5 times the average monthly payroll costs (whichever is less)

• Includes wages for employees making under $100,000, expenses for paid sick leave, healthcare and other benefits

• The maximum interest rate is 1%

• The loan term is 2 years

• No personal guarantee or collateral is required for the loan

• Payments deferred for 6 months

• Part of loan may be forgiven if spent during the first 8 weeks on operating expenses

• Loans are forgiven when used for Payroll (prorated for those making less than $100,000), Rent, Utilities, or Group Health Insurance

• Businesses can apply directly through their local lending institution starting April 3; Freelancers and individual contractors starting April 10

When can Small Businesses start applying?

• Starting April 3, 2020, small businesses and sole proprietorships can apply for loans to cover their payroll and other certain expenses through existing SBA lenders.

• Starting April 10, 2020, independent contractors and self-employed individuals can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.

• Other regulated lenders will be available to make these loans as soon as they are approved and enrolled in the program.

What information is needed to apply?

• Borrower certification required by the SBA

• Any payroll filings and Form 1099-MISC reported to the IRS, and state income, payroll, and unemployment insurance filings

• Borrower loan application

Next Steps:

• Contact your bank to obtain the PPP application to get the process started. Be sure to also ask for their list of additional documents needed to get process started

• If your bank is not processing PPP applications, and/or if you run into any issues processing the loan through your bank, consider submitting an online application through www.kabbage.com. Alternatively, consider starting a new banking relationship with your local community bank and/or Federal Credit Union to file the application

• Continue to reference the SBA PPP site for the latest information on this program

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