As part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a new $349 billion Paycheck Protection Program has been established. The Program will provide much-needed relief to millions of small businesses so they can sustain their businesses and keep their workers employed.
Paycheck Protection Program Overview
- The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.
- The U.S. Small Business Administration (SBA) will forgive loans if all employees are kept on the payroll for eight weeks, and the money is used for payroll, rent, mortgage interest, or utilities.
- The Paycheck Protection Program will be available through June 30, 2020.
- This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors, and self-employed persons), private non-profit organization, or 501(c)(19) veterans organizations affected by coronavirus/COVID-19.
- Businesses in certain industries may have more than 500 employees if they meet the SBA's size standards for those industries.
- Small businesses in the hospitality and food industry with more than one location could be eligible at the store and location level if the stores employs less than 500 workers, which means each store location could be eligible.
How to Apply
- You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with you local lender as to whether it is participating in the program.
- Lenders may begin processing applications as soon as April 3, 2020.
Loan Details and Forgiveness
- The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75 percent of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.
- Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
- This loan has a maturity of two years and an interest rate of 0.5 percent.
- If you wish to begin preparing your application, you can download a sample form to see the information that will be requested from you.