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Paycheck Protection Program (PPP)
These loans are being administered by the Small Business Administration. The purpose of the loan is to allow you to continue to employee your workers through this Covid-19 hardship.
If you are utilizing other Covid-19 relief programs established by the CARES Act to assist with payroll, you will not also be able to use this loan. If you received an Economic Injury Disaster loan for reasons other than payroll, you can still receive the PPP loan.
What is the Paycheck Protection Program?
It is a loan that covers the period beginning February 15, 2020 and ending June 30, 2020. The purpose of the loan is to continue to pay workers for at least an 8 week period. These loans can be used for payroll (including tip income), state and local payroll taxes, vacation and leave for employees, health and retirement benefits of employees, mortgage or rent payments for the business, utilities for the business, and interest on other debts incurred prior to the covered period.
This is non-recourse debt, and no personal guarantees are required, unless the loan is used for unauthorized purposes. The loan amount may be equal to two and a half (2.5) times the average monthly payroll costs for the 1 year period prior to application. Loan payments will be deferred for 6 months. Currently the SBA has set the maturity date to 2 years and the interest rate to .5%. Lenders can begin processing applications on April 3rd.
You can apply through existing SBA 7(a) lenders or any federally insured depository institution, federally insured credit union, Farm Credit System that is participating. Check with your lender to see if they are participating. Back to Top
Businesses and private non-profit organizations with less than 500 employees are eligible. That includes sole proprietors, independent contractors, and self-employed persons. Businesses in hospitality or the food industry with multiple locations will qualify if they have less than 500 workers per location.
Loan forgiveness means the principle of the debt will be canceled. Employers can apply for loan forgiveness and submit documentation proving the costs that the loan was used for and verifying the number of employees on payroll. If the loan is forgiven and the debt is canceled, under the provisions set forth in the CARES Act, the canceled debt may be excluded from income to the employer. (Canceled debt is normally taxable income.)
Be aware that changes to salaries or changes to the number of employees will reduce the amount of the loan that can be forgiven. Remember that the purpose is to maintain employment at normal pay rates. Back to Top
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