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The Paycheck Protection Program, How to Get Funds to Keep Payroll Going

Barbara Dreves

Small businesses that maintain their payroll during the COVID-19 crisis, can borrow money from the Small Business Administration (SBA). The new Paycheck Protection Program can help small-business owners and their employees ride out this economic storm by businesses by forgiving a portion of that loan.


Eligibility for the SBA’s Paycheck Protection Program

· Small businesses with fewer than 500 employees are eligible to apply to the Paycheck Protection Program including:



o Sole proprietorships,

o Self-employed individuals

o Independent contractors

· The small business must certify that their business has been affected by the coronavirus slowdown.

· Businesses must have been in operation as of February 15, 2020.

· Business owners’ credit scores will be evaluated.

o However, lenders will not require collateral or a personal guarantee.

When to apply

· The Paycheck Protection Program loans applications start on Friday, April 3, 2020.

· Loans are on a first-come, first-served basis.

· Attached is an application.

Amount available

· The amount of the loan can be up to 2.5 times the borrower’s average monthly payroll costs.

· The maximum amount that can be borrowed is $10 million.

· The date range for calculating that average cost is different for seasonal businesses, nonseasonal businesses, and firms that opened in 2020.

Payroll cost calculation

· Payroll costs include:

o Salaries

§ Employee‘s salary in excess of $100,000 is excluded

o Bonuses

o Retirement benefits

o Parental leave

o Health care benefits

· The gray area

o It is not clear yet, but payroll costs maybe able to include payroll taxes and workers comp insurance.

Loan payback

· Within 60 days of forgiveness submission, a decision on forgiveness of the Paycheck Protection Program loan will be made.

o Borrowed money used for the following list in the eight weeks following the date of origination can be forgiven:

§ payroll,

§ mortgage interest,

§ rent, or

§ utilities

· That means business owners will not have to pay the government back the full principal amount of the money borrowed.

· Borrowers will need to provide documentation of these expenses in their loan forgiveness application.

· The loans will be forgiven as long as the funds are used to keep employees on the payroll.

· The forgiven money will be reduced for employers that lay off employees or reduce wages by more than 25%.

· Laid-off employees must be rehired by June 30 for companies to recoup their wages through loan forgiveness.

How to apply

· Borrowers should talk to their current bank to see if they already offer SBA loans.

· If not, small businesses can apply at banks that already offer Small Business Administration loans.

· The number of lenders offering loans through the Paycheck Protection Program will end up being greater and includes many more traditional banks, credit unions, and fintech firms.

· Businesses can apply for a loan and be approved on the same day.

Cost of the loan

· There is no cost to apply for this loan

· Businesses will be charged a fixed interest rate

Interest rate

· The Paycheck Protection Program will have a 0.5% fixed interest rate.

· The first payment is deferred for six months.

When will funds be available

· The loans process has been streamlined.

· The approval process will be far more quickly than previous SBA-backed loans.

· The “stripped down” applications will not require SBA approval and funds could be made available on the same day you apply.

Should I apply?

· Short answer. Yes.

· It’s a great deal for small businesses, contractors, and self-employed people.

· A forgivable loan like this should help you retain payroll during the coming weeks when they’re likely to watch sales continue to dry up.

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