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The Paycheck Protection Plan (PPP) – Coronavirus Aid, Relief, and Economic Security (CARES) Act

On Behalf of | Apr 8, 2020 | blog |

The Coronavirus has impacted the economy of the entire nation in a manner that was not imaginable three months ago.  Congress has responded by passing the largest stimulus bill in American history.  The CARES Act was passed and signed by the President on March 27, 2020.  The economic opportunities available to small businesses through this act are significant and, in some cases, can make a difference in whether a small business can weather this economic storm.  Division A, Title I – Keeping American Workers Paid and Employed Act outlines the PPP that is part of the CARES Act.

A summary of the Paycheck Protection Program under the CARES Act is as follows:

  • The PPP is a $349 Billion loan and loan forgiveness program administered through the Small Business Administration.  The program establishes the federally-guaranteed loans of up to $10 million to eligible businesses.
  • Available through any approved lending institution. (Your regular bank is probably already approved if they handle SBA Loans).
  • It is available to small businesses that employ less than 500 employees.
  • The loan, principle and interest, would be forgiven 8 weeks after the loan is received if you retain your employees and you used the money for allowable uses.  You will have to verify what the funds were used for in order for the loan to be forgiven.  If funds are used for other purposes that portion of the loan will not be forgiven.  The verification process may require you to provide sufficient documentation.
  • The amount available is calculated by taking your average monthly payroll (full-time and part-time employees) over the last 12 months and multiplied by 2.5.  If your average monthly payroll is $50,000.00, your maximum loan amount would be $125,000.00.  This amount is intended to cover 8 weeks of payroll and any additional amounts made toward debt obligations.
  • The funds must be used for 1) Payroll costs, 2) health care benefits, 3) employee salaries (including commissions), 4) mortgage interest payments, 5) utilities, 6) rent, and 7) interest on some other debt obligations.
  • The maximum amount of allowable interest, on borrowed funds that are not forgiven, is 4%.
  • The payments on any loan under the act will be deferred for up to six to twelve months.
  • No Bank Fees for a PPP loan.
  • To be eligible you must apply before June 30, 2020.
  • The application process could be time consuming.  As of this writing the application process had not been finalized.