Paycheck Protection Program for Small Business

Recently, the Corona Aid Relief and Economic Security Act (CARES Act) was signed into law. The CARES Act allocates $350 billion to the Paycheck Protection Program (PPP). The PPP program is designed to help small businesses meets their payroll and other financial needs by providing businesses with a loan to be used for any of the following expenses:

  • Payroll expenses up to $100K per employee (sub-contractors are not included).
  • Mortgage, rent or lease payments.
  • Health benefits under a group health plan.
  • Retirement Plan funding payments.

Eligible small businesses have less than 500 employees, and include Corporations, General partnerships, LLCs, and sole proprietors. Self-employed, independent contractors and GIG workers also may qualify.

The loan amount for which a small business qualifies is 250 percent of their average monthly payroll expense for the prior 12 months. The amount is intended to cover 8 weeks of payroll expenses and any additional amounts for making payments toward debt obligations.

If you already have an existing SBA loan under the EIDL (Disaster loan), you are not able to take out a PPP loan at the same time. EIDL grant awards would be subtracted from the amount given under the PPP loan. Also you can refinance existing EIDL loans into the PPP program for loan forgiveness purposes.

At the end of the 8 week period after you take out the loan, borrowers will work with lenders to verify covered expenses and the proper amount of forgiveness. Loan amounts used for PPP qualified expenses will be forgiven. Funds used for expenses outside of the PPP program (such as purchasing Inventory for example) will be rolled into a loan at a 1% interest rate for 2 years. Loan payments will be deferred for at least 6 months and up to one year starting at the origination of the loan. Personal guarantees and collateral requirements are waived.

Many requirements are complicated regarding employee retention and loan forgiveness or partial forgiveness. Wright Kirby & Co can help you to fully understand the programs offered, and assist in the paperwork necessary to meet the June 30, 2020 deadline. Remember, loans are on a first come first serve basis until the funds run out. The Treasury is updating and clarifying the rules on a regular basis.

Many banks, including your own, will be able to underwrite the loan program. If your bank does not participate, we may be able to refer to an authorized loan processor.

Don’t delay, get your application completed efficiently in order to apply. We are here to help you understand your rights under these new programs and help your business navigate these tough times.

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