Paycheck Protection Program - SBA
Small Business Administration – Paycheck Protection Program
Paycheck Protection Program Page - Small Business Administration
Paycheck Protection Program Guidance - U.S. Dept. of Treasury
Coronavirus Emergency Loans - Small Business Guide and Check List - U.S. Chamber of Commerce
The Treasury has released the application that small businesses can use to apply for an SBA Paycheck Protection Program loan on March 31st in the evening.
You can find it here:
More detail from the Treasury for borrowers:
Applications will be made through your bank (if eligible) or one that currently handles SBA 7a loans.
If your bank is not an SBA 7a lender, a list of SBA lenders can be found here: https://www.sba.gov/article/2020/mar/02/100-most-active-sba-7a-lenders
Applications can be submitted starting Friday, April 3rd.
For more information on the application process
The CARES Act would expand the Small Business Administration’s (SBA) authority to issue loans to small businesses to respond to the economic uncertainties that have arisen from the Coronavirus outbreak. The emergency relief bill would allow SBA to issue short-term, forgivable loans to cover payroll costs and other expenses under a new program, the “Paycheck Protection Program”.
Eligible entities which can apply for the loans include:
The Paycheck Protection loans can be used to pay for the following expenses:
- Any business concern that employs less than 500 employees (full and part-time); or if applicable, the size standard in number of employees established by the Administration for the industry in which the business concern operates.
- 501(c)(3) nonprofit organizations.
- Sole proprietors, independent contractors, and self-employed individuals.
The interest rate on these loans cannot exceed 4%.
As mentioned above, these loans can be forgiven. Loan recipients can calculate the amount to be forgiven by calculating the sum total of the following “costs incurred and payments made” during the 8-week period beginning on the date of the covered loan origination:
1. Payroll costs (defined below).
2. Interest on mortgage obligation (which shall not include any prepayment of or payment of principal).
4. Utility payments.
The total amount for forgiveness must not exceed the original principal amount. The amount of loan forgiveness can be reduced if the recipient reduces the number of employees or reduces salaries during the 8 weeks following the origination date.
Payroll costs are defined as the sum of all payments for employees’:
- Payroll costs (defined below)
- Costs related to the continuation of group health care benefits AND insurance premiums
- Salaries, commissions, or similar compensations
- Interest on mortgage obligations (not to include any prepayment of said obligation nor any principal)
- Interest on any other debt obligations incurred prior to February 15, 2020
Payroll costs would not include:
- Salaries, wages, commissions, or similar compensation (up to $100,000 annual compensation as prorated for the covered period);
- Payment of cash tip or equivalent
- Vacation, parental, family medical, or sick leave;
- Severance payment;
- Health care benefits, including insurance premiums;
- Retirement benefits;
- State or local tax assessed on said compensation; and
- Payments of wages, commission, or similar compensation to any independent contractors that is $100,000 or less per year (as prorated for the covered period).
Lenders can impose the following minimum qualifications for a loan:
- Federal income tax and payroll tax contributions;
- Compensation of any employee whose principal residence is outside the US;
- Qualified sick and family leave wages covered by tax credits under the Families First Coronavirus Response Act.
And, eligible entities must certify on an application to the SBA, or other lender that:
- Borrower must have been in operation as of February 15, 2020, and
- Paid salaries and payroll taxes, or, paid independent contractors
- the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the eligible recipient;
Loans can be issued directly by SBA or through private sector institutions in cooperation with SBA on an immediate or guaranteed (deferred) basis.
Level of Participation: A guaranteed SBA Paycheck Protection loan would cover 100% of a small business’ payroll costs through the covered period.
The Covered Period for the loans would retroactively start on February 15, 2020 and end on June 30, 2020.
Documentation requirements on independent contractors and sole proprietors and self-employed:
- funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments;
- the eligible recipient does not have an application pending for an SBA economic injury disaster loan for the same purpose and duplicative of amounts applied for or received under a covered loan; and
- During the period beginning on February 15, 2020 and ending on December 31, 2020, that the eligible recipient has not received amounts for an SBA economic injury disaster loan for the same purpose and duplicative of amounts applied for or received under a covered loan.
The Maximum Loan Amount will equal the lesser of:
5. The average total monthly payments by the applicant for payroll costs incurred during the 1-year period before the date the loan is made, times 2.5.
6. The outstanding amount of a loan made to the business concern by the SBA in February.
If an eligible recipient was not in business in the period from 2/15/19 – 6/30/19, the maximum amount will be the average total monthly payments for payroll costs from 1/1/20 – 2/29/20, or $10 million.
The outstanding amount on any other SBA loans that were made to an eligible recipient from January 31, 2020 until the enactment of the Paycheck Protection Program will be available to be refinanced under the new covered loan.
The fees normally applicable to SBA loans would be waived for the loans made under the Paycheck Protection Program.
Eligible entities need not prove to SBA that credit was sought elsewhere prior to applying for the new loans. This old SBA requirement is waived under this new loan program.
Eligible recipients of a covered loan under this program shall not be eligible to receive an economic injury disaster loan under the Small Business Act for the same purpose.
The CARES Act authorizes $349 billion to SBA for all loan programs from February 15, 2020 through June 30, 2020.
- Documentation that is necessary to establish eligibility, including payroll tax fillings, 1099 forms, and income and expenses documents and records.