COVID-19: Learn more about the US Government’s Paycheck Protection Program

Jeffrey Brown • April 02, 2020
Jeffrey Brown

COVID-19:  Learn more about the US Government’s Paycheck Protection Program

The US Small Business Administration (SBA)’s Paycheck Protection Program (PPP) was created by The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) to help small businesses impacted by COVID-19.

The CARES Act provides $349 billion of funding for SBA loan guarantees and additional funding for SBA programs including the new PPP. PPP provides loans of up to $10 million (principal amount up to 2.5 times average monthly payroll costs) at a maximum interest rate of 4%. Loans are 100% guaranteed by the US government through the end of 2020. PPP loans have a two-year maturity and a current interest rate of .5%.

PPP loans are available for small businesses with less than 500 employees including sole proprietorships, independent contractors, self-employed persons, private non-profit organization and veterans’ organizations affected by COVID-19. Businesses in certain industries with more than 500 employees may be eligible if they meet SBA’s industry specific size standards. Small businesses in the hospitality and food industry with more than one location may be eligible at each store and location level if a store employs less than 500 workers.

Proceeds can be used for employee salaries, medical leave, insurance premiums, mortgage, rent, and utility payments. Borrower eligibility considers whether the borrower was operational on February 15, 2020 rather than its repayment ability. Payments of principle, interest and fees are deferred for up to one year.

PPP loans will be fully forgiven if proceeds are used for payroll costs, interest on mortgages, rent and utilities. At least 75% of the forgiven amount must have been used for payroll costs. Loan payments will also be deferred for six months. No collateral or personal guarantees are required. There are no lending fees. Forgiveness is based on an employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.

Lenders include existing SBA Section 7(a) lenders and participating federally insured depository institutions, credit unions and Farm Credit System institutions. Other regulated lenders will be available to make PPP loans once approved by SBA and enrolled in the program.

Lenders may begin processing loan applications as soon as April 3, 2020.

Potential borrowers can read more about the PPP here, or contact Fuller Landau’s Jeffrey Brown, CPA.