Payment Protection Program

The Paycheck Protection Program authorizes $349 billion in no-fee small business loans. It is available for Nonprofit and for-profit businesses with fewer than 500 employees1, including the self-employed and those that receive Medicaid funding.

Program covers:

• Qualified payroll costs
• Rent, utilities
• Interest on mortgage and other debt obligations

Businesses can borrow 2.5 times their monthly payroll expenses, up to $10 million. The initial loan rate has been set at 0.5 percent, but the CARES Act caps the interest rate at 4 percent, so it is possible the interest rate could increase.

The program includes loan forgiveness covering costs for the first eight weeks of the loan for companies able to keep employees on payroll or continue paying bills throughout the coronavirus crisis.

Applications:

Businesses can start the application process and learn more from their bank or an approved lending institution. Loans are available until December 31, 2020.

Economic Injury Disaster Loan

The CARES Act also expands eligibility for borrowers applying for an Emergency Economic Injury Disaster Loan (EIDL) grant. This is available for Non-profits and for-profit businesses or cooperatives with fewer than 500 employees, sole proprietors or independent contractors, or Employee Stock Ownership Plans (ESOPs) with fewer than 500 employees.

The CARES Act waives requirements for:

• Borrowers who provide a personal guarantee for loans up to $200,000
• Eligible businesses be in operation for one year prior to the disaster
• Borrowers be unable to obtain credit elsewhere

Loans up to $2 million are available. Borrowers may receive a $10,000 emergency advance within three days after applying for an EIDL. Even if the application is denied, the applicant is not required to repay the $10,000 advance.

Loans can be used for:

• Payroll costs
• Increased material costs
• Rent or mortgage payments
• For repaying obligations that cannot be met due to revenue losses

To apply, visit SBA’s website:

Apply directly to the Small Business Administration (SBA). More detailed information is available on the SBA’s website. The SBA will disburse the funds within five days of receiving the executed loan closing documents.

Small Business Check List:

https://www.uschamber.com/sites/default/files/023595_comm_corona_virus_smallbiz_loan_final.pdf

Paycheck Protection Program:

https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp

Affiliation rules applicable to US Small Business Administration Paycheck Protection Program:

https://www.sba.gov/sites/default/files/2020-04/Affiliation%20rules%20overview%20%28for%20public%29%20v2.pdf

What is the lender looking for?

The borrower will need to complete the Paycheck Protection Loan Application. https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Application-3-30-2020-v3.pdf

Lenders will also ask you for a good faith certification that:

• The uncertainty of current economic conditions makes the loan request necessary to support ongoing operations
• The borrower will use the loan proceeds to retain workers and maintain payroll or make mortgage, lease, and utility payments
• Borrower does not have an application pending for a loan duplicative of the purpose and amounts applied for here
• From Feb. 15, 2020 to Dec. 31, 2020, the borrower has not received a loan duplicative of the purpose and amounts applied for here

(Note: There is an opportunity to fold emergency loans made between Jan. 31, 2020 and the date this loan program becomes available into a new loan) If you are an independent contractor, sole proprietor, or self-employed individual, lenders will also be looking for certain documents (final requirements will be announced by the government) such as payroll tax filings, Forms 1099-MISC, and income and expenses from the sole proprietorship.