Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which allocated $350 billion to help small businesses keep workers employed. This section of the bill, known as the Paycheck Protection Program, provides 100% federally guaranteed loans to small businesses. For a top-line overview of the program, click here. The Treasury Department has issued updated guidance on this program that I wanted to share with you:
Loan Terms & Conditions
- Eligible Businesses: All businesses, including non-profits, veterans organizations, tribal concerns, sole proprietorships, self-employed individuals, and independent contractors, with 500 or fewer employees, or no greater than the number of employees set by the SBA as the size standard for certain industries.
- Application: Starting April 3, 2020, small businesses and sole proprietorships can apply for and receive loans through existing SBA lenders. Starting April 10, 2020, independent contractors and self-employed individuals can apply for and receive loans through existing SBA lenders.
- Loan Size: Loans can be for up to 2.5 months of your average monthly payroll costs from the last year. That amount is subject to a $10 million cap. Payroll costs will be capped at $100,000 annualized for each employee.
- Loan Forgiveness: Businesses that maintain payroll continuity from February 15, 2020 through June 30, 2020 as defined by headcount, are able to request forgiveness on a paycheck protection loan used on payroll costs, mortgage interest, rent on a leasing agreement, utility pay, and for borrowers with tipped employees, additional wages paid to those employees, over an 8-week period. Not more than 25% of the forgiven amount may be for non-payroll related expenses.
- Additional Features:
- Interest rate of 1%
- Maturity of 2 years
- First payment deferred for six months
- 100% guaranteed by SBA
- No collateral
- No personal guarantees
- No borrower or lender fees payable to SBA
- If you’re a lender, more information can be found here.
- If you’re a borrower, more information can be found here.
- A sample application for borrowers can be found here.
- Answers to frequently asked questions can be found here.