The Coronavirus Aid, Relief, and Economic Security (CARES) Act provided for small businesses to receive low-interest loans under the Paycheck Protection Program (PPP). At this writing, Congress is considering additional billions in funding to replenish the depleted program. Meanwhile, here is an overview of the program.

WHO CAN APPLY
Loans may be available to businesses with fewer than 500 employees that were in operation on February 15. This includes not-for-profits, veterans’ organizations, Tribal concerns, self-employed individuals, sole proprietorships, and independent contractors. According to the SBA and Treasury, some businesses with more than 500 employees in certain industries also can apply for loans.

Specific loan amounts are calculated as two months of a company’s pre-coronavirus average monthly payroll costs plus an extra 25%. The PPP loans have a 1% interest rate and a two-year repayment term, which is deferred for the first six months.

LOAN FORGIVENESS
The loan may be fully, or partially forgiven provided the company appropriates at least 75 percent of the loan to cover payroll, including benefits costs, within eight weeks. Additionally, not more than 25% of the loan may be attributable to nonpayroll costs, including mortgage interest, rent and some utilities.

If you reduce your staff or their wages, the rate of forgiveness on your loan lowers – meaning you will be on the hook to repay ineligible funds. Business owners must rehire any laid off employees by June 30.

Before applying for the Paycheck Protection Program, consult with your tax advisor to make sure you can feasibly meet all of the requirements within your current business outlook and that you fully understand the rules. Keep in mind that if you are unable to meet every requirement perfectly, your loan may not be forgiven and you will be responsible to pay it back within two years.

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