30 Mar Paycheck Protection Program Loans
*****THIS BLOG POST HAS BEEN SUPERSEDED, SPECIFICALLY THE TERMS OF THE LOAN RATES AND REPAYMENTS. SEE UPDATED BLOG POST PAYROLL PROTECTION PROGRAM LOAN APPLICATION RELEASED*****
Seemingly the most significant lending option in the CARES Act, the small business-focused Paycheck Protection Program increases the government guarantee of loans to 100% through December 31, 2020, for SBA 7(a) loans. While they are being offered as an expansion under existing SBA 7(a) loan programs, they are being expedited to businesses to access capital during the Coronavirus outbreak.
Eligibility – For small to medium employers (less than 500 employees), self-employed individuals and “gig economy” workers aimed to help prevent workers from losing their jobs and to assist businesses to stay afloat through cash-flow assistance.
Covered Loan – Any loan made during the period of February 15, 2020 – June 30, 2020.
Loan Terms – These loans are for a maximum of:
• 2.5 times total average monthly payroll costs incurred in the one-year period before the loan is made,
• Or $10,000,000.
The loans will carry a maximum term of 10 years at a rate of 4%.
Eligible Costs – The allowable uses of the loan are payroll costs, rent/lease payments, mortgage obligations, utilities and interest on debt obligation (not principal). As defined by the law, eligible payroll costs include:
• Salary, wage, commission or similar compensation
• Payment of cash tip or equivalent
• Payment for vacation, parental, family, medical or sick leave
• Payment required for group health care benefits
• Payment of any retirement benefits
• Any state or local tax assessed on compensation
Payroll costs are limited to salary of up to $100,000 per year. Any amounts above this are ineligible.
Also, the employer’s portion of payroll taxes (FICA) is not considered a covered payroll cost.
Deferment – The program allows for deferment for a minimum of 6 months and up to one year, on payments of principal and interest.
Loan Forgiveness – Loan proceeds used within 8 weeks of the origination of the loan are eligible for forgiveness, pending the following:
• The loan recipient maintains a certain salary level for staff
• The loan proceeds are used for permitted purposes
• The loan recipient maintains a certain number of full-time employees.
Click here for the US Chamber of Commerce – Small Business Guide and Checklist
Important to Note:
• Being a part of a Professional Employer Organization (PEO) does not impact the count of your employees or your eligibility.