Congress is spending $350 billion to help small businesses through the Paycheck Protection Program known as PPP. This stimulus package is part of the $2 Trillion stimulus packaged named CARES Act.
How Will It Help Small Businesses?
Small businesses will receive loans up to $10 Million as long as they have fewer than 500 employees. The interest rate is at 1% and the loan term is two years. What is unique about these loans is that they are “forgivable” which means that the owners get to keep the money if they use it to keep paying employees who earn less than $100,000 a year, or for monthly rent (or mortgage) and utilities. However, 75% of the loan proceeds must be used to pay for payroll. Also, the first loan payment will be deferred for six months. If the owner elects to use the money for anything else, then they must repay the money within two years at a 1% interest rate with a government guarantee protecting the bank or credit union from the loss.
What About the Loan Fees?
What is unique about these loans is that SBA nor the lending institution can charge the borrower any fees. This is unheard of in the industry.
Benefits of Stimulus
This stimulus package is excellent news for a small business struggling to keep employees on the books due to the coronavirus. Congress’s main objective is to prevent people from facing unemployment until this virus passes, and companies can return to normal operations.
When Will the Loans Be Available?
The PPP Loan Program is available April 3 through June 30, 2020. These loans are only for a limited time. Also, make sure that you are signing up for the right program. Only the Payroll Protection Program (PPP) loans are forgivable.
How Long Will the Money Last?
The Payroll Protection loans are only available until June 30, 2020. The purpose of the loan is to help small businesses with their cash flow and to keep them afloat until this virus passes. If your business is expected to fall behind on payments you are urged to contact your landlords, banks and credit card companies and ask for extensions. A lot of times extensions are granted.
How Do You Apply?
The first step is to call or email your bank and ask for the loan officer who handles SBA 7(a) loans and the PPP program. You can also reach out to your local SBA office for assistance.
The PPP application can be download at the U.S. Treasury website. As always, be careful who you provide your personal information to. For more information on the CARES Act programs, click here.
Stimulus Summary
We have recently discussed two programs to assist your business during these tough times. Just remember that you should only select the PPP or the Disaster loan. Selecting one may make you ineligible for the other program. That is why it is best to do your research first.
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