As part of the CARES act that was signed by the President last Friday, small businesses can apply for relief programs, including the Small Business Paycheck Protection Program.
The Paycheck Protection Program provides small businesses with funds to pay up to 8 weeks of payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities.
As obtained from the U.S. Department of The Treasury website, here’s what you need to know:
Funds are provided in the form of loans that will be fully forgiven when used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% 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.
Must Keep Employees on the Payroll—or Rehire Quickly
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.
All Small Businesses Eligible
Small businesses with 500 or fewer employees—including nonprofits, veterans’ organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors—are eligible. Businesses with more than 500 employees are eligible in certain industries.
When to Apply
Starting April 3, 2020, small businesses and sole proprietorships can apply. Starting April 10, 2020, independent contractors and self-employed individuals can apply. We encourage you to apply as quickly as you can because there is a funding cap.
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 your local lender as to whether it is participating. All loans will have the same terms regardless of lender or borrower. A list of participating lenders as well as additional information and full terms can be found at www.sba.gov.
Other Helpful Links
US Department of The Treasury Assistance for Small Businesses: https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businesses
Topline overview of the program: https://home.treasury.gov/system/files/136/PPP%20--%20Overview.pdf
Information Sheet for borrowers: https://home.treasury.gov/system/files/136/PPP--Fact-Sheet.pdf
Application for borrowers: https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Application-3-30-2020-v3.pdf
We recommend contacting your federally insured depository institution to ask what information they require with the application, as well as their preferred method for application submission. For the latest program information and updates, bookmark https://home.treasury.gov/cares.