June 3 Update: Senate Approves Paycheck Protection Program Flexibility Act of 2020; President Trump Expected to Sign.
The U.S. Treasury today announced new information regarding the Paycheck Protection Program, a part of the $2 trillion CARES Act stimulus package that has garnered a lot of attention since it was signed into law on Friday.
The Paycheck Protection Program (“PPP”) authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. All loan terms will be the same for everyone.
The loan amounts will be forgiven as long as:
- The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8-week period after the loan is made; and
- Employee and compensation levels are maintained.
Payroll costs are capped at $100,000 on an annualized basis for each employee. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs. Loan payments will be deferred for 6 months. The interest rate is fixed at 1%, and any amount not forgiven is due in 2 years.
Who Can Apply? All businesses – including nonprofits (501(c)(3) and 501(c)(19) organizations only), veterans’ organizations, Tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors – with 500 or fewer employees.
Businesses in certain industries can have more than 500 employees if they meet applicable SBA employee-based size standards for those industries. For this program, the SBA’s affiliation standards are waived for small businesses:
- in the hotel and food services industries (NAICS code 72);
- that are franchises in the SBA’s Franchise Directory; or
- that receive financial assistance from small business investment companies licensed by the SBA.
When Can Businesses Apply? Starting April 3, 2020, small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders. 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. Other regulated lenders will be available to make these loans as soon as they are approved and enrolled in the program.
How Do Businesses Apply? You will need to complete the Paycheck Protection Program loan application and submit the application with the required documentation to an approved lender that is available to process your application by June 30, 2020. In addition to the application, you will need to provide your lender with payroll documentation.
Use this link to apply Borrower Paycheck Protection Program Application (v3).
Use this link as a resource to find SBA lenders in your state SBA Lender Resources by State.
Click here for an SBA Lender Match.
Source: U.S. Treasury Paycheck Protection Program (PPE) Information Sheet for Borrowers
We will continue to update you as we get more information on Coronavirus-related legislation and guidance that may impact you. Continue to check back here for the most up to date tax information and changes in response to Coronavirus. If you have more questions contact an MCB Advisor at 703-218-3600 or click here.
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