The main incentive for small businesses under the CARES Act is the Paycheck Protection Protection (PPP) program. The $349 billion funded through the Small Business Loan Program (SBA) account is intended to provide business loans to secure eight weeks' wages and other costs to help these businesses stay viable and enable workers to pay your accounts.
Understanding the PPP commercial loan program, how it works, and how to apply it will help you navigate this huge federal incentive program and get the funds you need as quickly as possible.
Key Points to Note
• You should apply for the PPP loan as soon as possible.
• PPP loans are available for less than $ 10 million or 2.5 times your average monthly salary.
• 100% of the loan can be canceled if the forgiven are followed.
• If you wish, you can apply for both the PPP and EIDL loan.
• Check your eligibility before applying.
• Apply by any creditor 7 (a) approved by the SBA.
In addition to the size requirement (500 employees or less for most companies), it is necessary to demonstrate that the Coronavirus has hurt your business. You will do so in part, certifying in your PPP application that the current economic uncertainty makes the loan request necessary
The qualification is divided to include:
• Any business classified in the "Accommodation or food services" category, such as restaurants and hotels with 500 employees or less per location
• Tribal Businesses
• Independent own franchise
• Independent contractors, self-employed workers, gig workers, and sole proprietors.
As mentioned above, PPP loans are managed by SBA approved creditors and are, in fact, a new form of the current SBA 7 (a) loan program. You can apply for your PPP loan from any of the 1,800 creditors approved by the SBA 7 (a) or from any federally insured deposit, credit union, and farm credit institution.
Other creditors will be available to make PPP loans once approved and enrolled in the program. Start consulting with your local lender if you are participating. If you're having trouble finding a creditor, try using the SBA Paycheck Protection Creditor Survey Tool.
If you are a self-employed or an independent contractor, your PPP loan application will take effect on April 10, 2020, according to the SBA.
Lenders are now accepting applications for small businesses and will continue until June 30, 2020, when the PPP loan program is completed. Start by downloading and filling out the registration form on the SBA website. The application includes instructions and is quite simple. Be prepared to show that your business was operational on February 15, 2020, that you also have average monthly salary costs by following the instructions on the request form.
All or part of the loan received under the PPP can be forgiven if you keep all employees in good working condition or if you re-employ them before June 30, 2020. Payroll costs must be equal to or greater than 75 % of the approved loan amount. Only 25% of the amount remitted can be used for expenses not related to the Paycheck status. Forgiveness will only appear at the end of the eight week work period after receipt of the loan.
• New Businesses: average monthly salaries from January 1 to February 29 (with a limit of $ 100,000 per employee).
• Sole proprietors: salaries, commissions, income or independent net profit (limited to $ 100,000)
• Staff costs: wages, salary, commissions, tips (with a limit of $ 100,000 per employee); Benefits include sick leave, paternity leave, vacation; State and local taxes on remuneration.
• Seasonal Businesses: Average monthly revenue between February 15 and June 30 (with a limit of $ 100,000 per).
• Other eligible costs: interest on mortgages; Rent for rent; utility
You must request in writing that the loan be forgiven. The request must document the number of full-time equivalent employees, Paycheck commissions, eligible mortgage or rental Paychecks, and utility Paychecks. Your lender has 60 days to respond.
The PPP is one of two programs created to help small businesses during the COVID-19 crisis. The other is the EIDL (Economic Injury Disaster Loan). While the two programs help struggling businesses recover, their objectives are slightly different from those suggested by the names of the two programs.
The Paycheck Protection Program is a new incentive program designed to help businesses keep their employees, which covers eight weeks of salary, as well as other costs of keeping the business going. This loan is fully forgivable if you follow the forgiveness guidelines.
The Disaster Loan Program is a dedicated program that helps small businesses overcome their loss of income during a reported disaster, such as a hurricane, major fire, or, in this case, the COVID-19 pandemic. This loan includes an advance of $ 10,000 (if applicable), which is automatically forgiven.
You Can Get Both
Many sole proprietors and small business owners are unaware that they can apply for the PPP and an EIDL loan for the same COVID-19 disaster. There are rules, including the main requirement, not to use the money from two loans for the same thing. For example, if you are using the resources of a PPP Paycheck loan, you cannot even use an EIDL Paycheck loan.
Before applying for a PPP loan, you can check the EIDL program to see if it can be better or decide whether it makes sense to apply both loans to you.
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