UPDATE: As of Wednesday, April 15, the Small Business Administration website states the SBA is “unable to accept new applications for the Paycheck Protection Program based on available appropriations funding. Similarly, we are unable to enroll new PPP lenders at this time.”
Where can I apply for the Paycheck Protection Program (PPP)?
You may apply for the PPP at any lending institution that is approved to participate in the program through the existing U.S. Small Business Administration (SBA) 7(a) lending program and addition lenders approved by the department of Treasury. This could be the bank you already use, or one nearby. You do not have to visit any government institution to apply to the program. Tons of banks are already participating in the SBA’s lending program, including a lot of community banks. In order to find out if your bank is participating you may call them, visit SBA’s online lender match tool and search through their approved lenders, and/or call your local Small Business Development Center or Women’s Business Center for free assistance.
Who is eligible for the loan?
Small businesses that employ 500 employees or fewer, or if your business is in an industry that has an employee-based size standard through SBA that is higher than 500 employees. Also, if you are a restaurant, hotel, or business that falls within the North American Industry Classification (NASICS) code 72, “Accommodation and Food Services,” and each of your locations has 500 employees or fewer, you are eligible. Tribal businesses, veteran organizations, nonprofits (including religious organizations) are eligible for the program. Nonprofit organizations are subject to SBA’s affiliation standards. Independently owned franchises with under 500 employees, who have been approved by the SBA, are also eligible.
I am an independent contractor or gig economy worker, am I eligible?
Yes. Sole proprietors, independent contractors, gig economy workers, and self-employed individuals are all eligible for the PPP.
What is the maximum amount I can borrow?
The amount any small business is eligible to borrow is 250% of their average monthly payroll expenses, up to a total of $10 million. This amount is intended to cover 8 weeks of payroll expenses and any additional amounts for making payments towards debt obligations. The 8-week period may be applied to any time frame between February 15, 2020 and June 30, 2020. Seasonal business expenses will be measured using a 12-week period beginning February 15, 2019, or March 1 2019, whichever the seasonal employer chooses.
How can I use the money such that the loan will be forgiven?
The amount of principal that may be forgiven is equal to the sum of expenses for payroll, and existing interest payments on mortgages, rent payments, leases, and utility service agreements. Payroll costs include employee salaries (up to an annual rate of ($100,000), hourly wages, cash tips, paid sick or medical leave, and group health insurance premiums. The PPP may also be used for other business-related expenses, such as inventory, but that portion of the loan will not be forgiven.
When is the loan forgiven?
The loan is forgiven at the end of the 8-week period once the loan has been taken out. Borrowers can work with lenders to verify covered expenses and the proper amount of forgiveness.
What is the covered period of the load?
The covered period where expenses maybe forgiven is between February 15, 2020 through June 30, 2020. Borrowers are also able to choose which 8 weeks they want to count towards the covered period.
How much of my loan will be forgiven?
The purpose of the PPP is to help retain employees, at their current base pay. If you keep all your employees, the entirety of the loan will be forgiven. If you still lay off employees, the forgiveness will be reduced by the percent of decrease in the number of employees. If your total payroll expenses on workers making less than $100,000 annually decreases by more than 25%, loan forgiveness will be reduced by the same amount. If you have already laid off some employees, you can still be forgiven for the full amount of your payroll cost if you rehire your employees by June 30, 2020.
Am I responsible for interest on the forgiven loan amount?
No, if the full principal of the PPP loan is forgiven, the borrower is not responsible for the interest accrued in the 8-week covered period. The remainder of the loan that is not forgiven will operate according to the loan terms agreed upon by you and the lender.
What are the interest rate and terms for the loan amount that is not forgiven?
The terms of the loan not forgiven may differ on a case-by-case basis. However, the maximum terms of the loan feature a 10-year term with interest capped at 4% and a 100% loan guarantee by the SBA. No fees on the loan will have to be paid nor any collateral requirements and personal guarantees are waived. Loan payments will be differed for at least six months and up to one year starting at the origination of the loan.
When is the application deadline for the PPP?
Applicants are eligible to apply until June 30, 2020.
I took out a bridge loan through my state, am I eligible to apply for the PPP?
Yes, you can do both.
If you have applied for, or received an economic injury Disaster Loan (EIDL) related to Covid-19 before the PPP was available, will I be able to refinance into a PPP loan?
Yes. If you received an EIDL loan related to Covid-19 between January 31, 2020 and the date at which the PPP became available, you would be able to refinance the EIDL into the PPP for loan forgiveness purposes. However, you may not take out an EIDL and a PPP for the same purposes. Remaining portions of the EIDL, for purposes other than those laid out in the loan forgiveness terms for a PPP loan, would remain a loan. Also, if you took advantage of an emergency EIDL grant award of up to $10,000, that amount would be subtracted from the amount forgiven under the PPP.