A major component of the CARES Act is the Paycheck Protection Program. It is aimed at keeping workers employed during this pandemic and economic decline. The initiative provides for 100% federally guaranteed loans to small businesses. If borrowers maintain their payroll during the crisis or restore their payroll afterward, the loans may be forgiven. The following are some key facts about the program:
Am I eligible?
You are eligible if you are a small business with fewer than 500 employees, a 501(c)(3) with fewer than 500 employees, an individual who operates as a sole proprietor, independent contractor or who is self-employed, a tribal business, or a 501(c)(19) Veterans Organization. Also, some special rules exist which may make a business eligible if it is in the accommodation and food services sector or operating as a franchise.
How much can I borrow?
Loans can be up to 2.5 times the borrower’s average monthly payroll costs, not to exceed $10 million.
Where can I apply for the Paycheck Protection Program?
You can apply at any lending institution that is approved to participate in the program through the existing U.S. Small Business Administration (SBA) loan program.
Will this loan be forgiven?
A borrower is eligible for loan forgiveness up to the amount the borrower spent on payroll costs, interest on business mortgage obligations, rent, utilities and additional wages paid to tipped employees during the 8-week period beginning on the date of the origination of the loan. This loan forgiveness is subject to reduction if there is a reduction in the number of employees or a reduction of greater than 25% in wages paid to employees.
For more information, visit the SBA website.