The Paycheck Protection Program: 4 Things All Small Business Owners Should Know

Today we're talking about how Small Business Owners can access their portion of the $350 Billion in loans being distributed via the new Payroll Protection Program. This is a provision of the recently enacted stimulus package.

The best part? 

If you are eligible and meet certain requirements you can get up to 2.5x your monthly payroll in FORGIVABLE loans.

This guide will walk you through who is eligible, how much you can get, what qualifying expenses are and how to apply. 

Let's dive right in.

What Types of Businesses Are Eligible for the Paycheck Protection Program?

Small businesses and non-profits with fewer than 500 Employees to include (not an exhaustive list):

• Sole Proprietorships  
• LLCs
• S-Corporations
• C-Corporations 
• Self Employed 
• 1099 Independent Contractors
• General Partnerships 
• Certain Veterans organizations
• Tribal business concerns 
• Food Service Businesses that employ fewer than 500 people per physical location
• Freelance 
• Gig Workers

The only stipulation is that your business was operational as of February 15, 2020. If you started your business after that date, you will not be eligible for this program.

How much Can I Get? 

Under the Payroll Protection Program, qualifying business can apply for 2.5x their average monthly payroll from the last year with a cap of $10 Million. 

Payroll costs will be capped at $100,000 annualized for each employee.

What amount is forgivable and how do I get my loan forgiven?

First things first, you should consider this a loan when you are applying.  In order to have any amounts forgiven you will have to prove you had qualifying expenses over the 8 week period following getting the loan.  

What Qualifies? 

• Payroll costs 
• Mortgage interest
• Rent 
• Utilities

IMPORTANT NOTE:  Only 25% of Non-Payroll Costs will be forgiven. 

You will also owe money if you do not maintain your staff and payroll.¹

• Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
• Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
• Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020. 

You will be assessed  a fixed 1% interest rate. If amounts are deemed non-forgivable, payment will be due in 2 years with the first being deferred 6 months (although interest will accrue during this period.)  There is no penalty for prepayment.  

How Do I Get a Payroll Protection Loan?

The loan program will provide loans directly through SBA-approved private lenders. As of this writing, many lenders are still working through the process and are not currently accepting applications. It’s important to check with your local bank to see where they’re at in the process. 

If you already have a business relationship with a bank, you should check there first, as many are only processing applications for current customers.  

As part of your application, you need to certify in good faith that:

• Current economic uncertainty makes the loan necessary to support your ongoing operations.
• The funds will be used to retain workers and maintain payroll or to make mortgage, lease, and utility payments.
• You have not and will not receive another loan under this program.
• You will provide to the lender documentation that verifies the number of full-time equivalent employees on payroll and the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight weeks after getting this loan.

Make sure you have tax documents available that back up these statements.  

Did we miss anything? 

We would love to hear from you:

Are you considering using the Payroll Protection Program?

Do you think this will help the economy in the long term?

Have you already applied and can share some good tips.?

Shoot me an email HERE and let me know!