To incentivize employers to maintain payroll during the COVID-19 pandemic, the SBA is providing up to $349 billion in 100% federally backed loans for certain payroll and overhead expenses. Beginning, April 3, 2020, small businesses can begin applying for loans under the Payroll Protection Program (PPP). The loans are forgivable if employers retain employees at salary levels comparable to what they earned prior to the crisis, capped at $100,000 per employee. Funds can also be used to pay interest on mortgages, rent, and utilities. The PPP waives all SBA fees and provides deferral on loan repayments for a minimum of six months up to a maximum of one year.
Who is Eligible?
All Small businesses with 500 or fewer employees — including nonprofits, veteran organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors—are eligible to apply. Businesses with more than 500 employees are eligible in certain industries. Each entity is limited to one loan, determined by the applicable taxpayer identification number (TIN). The loan terms will be the same for all borrowers.
Starting April 10, 2020, independent contractors and self-employed individuals can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.
How to Apply?
The Department of the Treasury released the Paycheck Protection Program Borrower Application Form on April 2, 2020 and is now available for download. To apply, small businesses must contact a lender and submit the application along with supporting documentation verifying information such as the number of employees on payroll and compensation levels. All current SBA 7(a) lenders are eligible lenders for PPP. The U.S. Department of Treasury is responsible for authorizing new lenders. A list of participating lenders as well as additional information and full terms can be found at www.sba.gov.
Although the loan application period is open until June 30, 2020, small business who wish to apply for a loan under the PPP should contact their lender as quickly as possible as funding is limited and lenders need time to process the loan.