I have many clients that operate small businesses and I am investigating how they may be helped by the new Federal programs directed at providing relief caused by the Corona virus.
In the paragraphs below, I will share that I’ve learned about the programs in the hope that it will be educational to others.One of the most helpful sites regarding relief programs is run by the US Small Business Association. An overview of the help being provided by the SBA can be found at the SBA website here. The US Treasury site here also provides some good guidance and summaries.
For many businesses, they may be interested in the debt and relief programs. Details of those programs can be found here.
Some businesses may be interested in other programs such as the Economic Injury Disaster Loan Emergency Advance (EIDL) Loan Advance ($10,000), the SBA Express Bridge Loans (up to $12,000) and the SBA Debt Relief Program.
Who can apply for the PPP:
Generally, the program is for small businesses with less than 500 employees affected by coronavirus/COVID-19. In addition to businesses that have employees and payroll, small businesses include sole proprietorships, independent contractors and self-employed persons are eligible for the PPP.
Loan Details for the PPP:
The loan will be applied for through your business bank. The loan will have a maturity of 2 years and an interest rate of 1%. The maximum loan amount will generally be 2.5 times your monthly payroll costs or self-employed net business income. Details of expected amounts that can be borrowed can be found the this SBA Interim document. Pages 8-11, paragraphs c-f are helpful.
To see the type of information that will be requested when you apply with your lender, a preliminary copy of the application can be downloaded at PPP borrower application form. Your bank can be expected to have additional forms and require additional documentation as you apply for the loan.
PPP Loan Forgiveness:
Forgiveness of the PPP loan is based on the employer maintaining or quickly rehiring employees and maintaining salary levels.
The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities. At least 75% of the forgiven amount must have been used for payroll. Loan payments will also be deferred for six months.
- Call your business banker as soon as you know you want to consider applying for the programs. You want to be on their notification list so that you can apply online as soon as they are ready to accept applications and supporting documents. Loans will be made on a first come, first served basis.
- April 3rd is when banks started taking applications if you have employees and a payroll.
- April 10th is when banks started taking applications for sole proprietors, independent contractors and self-employed individual. Loans for these entities are expected to require additional documentation so it is even more important to talk to your banking institution early.
Suggested Next Steps for PPP Participation:
- Talk to your existing banker to tell them you expect to apply for this type of loan. Ensure they will be processing this type of loan, and that they will process it for you.
- Consolidate the information expected to be asked for your application.