Could your company benefit from a loan from the Paycheck Protection Program (PPP)? The program was set to expire, but of the $660 billion allocated for the fund, $130 billion remained unspent. Meanwhile, businesses in the Metroplex and across America are struggling for capital.
Now, Congress and the Trump administration have agreed to extend the program’s deadline to Aug. 8. The loans are meant to help businesses cover approximately two and a half months of typical expenditures. The program has already lent about $520 billion to nearly 5 million small businesses.
The loan program has been under some criticism for lending to companies that could probably have survived without forgivable loans, such as Potbelly, the restaurant chain, Halllador Energy and Quantum, a video storage firm. Each received the maximum loan of $10 million.
“As the scope of the financial damage done to small businesses by the pandemic and resulting lockdowns has grown, it has become clear that longer-term support is necessary,” said Senator Marco Rubio in a statement. He added that the program should provide more support for “our smallest businesses, especially in our underserved communities.”
Perhaps the best news is that the loans are fully forgivable if you spend the funds on payroll expenses, rent, mortgage interest or utilities, although at least. However, at least 60% of the forgiven amount must be used for payroll.
Here are some details of the program, which is administered through the Small Business Administration:
- The interest rate is 1%.
- There is a maturity of five years.
- Loan payments will be deferred for six months.
- You will not be required to provide collateral or a personal guarantee.
- There are no fees from the government or lenders to small businesses using the program.
The degree to which the loan will be forgivable depends in part on your maintaining your payroll or quickly rehiring employees. If your full-time headcount goes down or salaries and wages decline, the forgiveness will be reduced.
You can calculate your payroll costs using an “alternative payroll covered period” that can align with your regular payroll cycle.
What types of businesses are eligible?
- Small businesses, sole proprietorships, independent contractors and the self-employed
- Any small business meeting the SBA’s size standards
- Any business with an NAICS Code beginning with 72 (accommodations and food services)
- Any business, 501(C)(3) nonprofit, 501(c)(19) veterans organization, or Tribal business concern (sec. 31(b)(2)(c) of the Small Business Act) with the greater of 500 employees or, if more than 500 employees, the SBA industry size standard