The Paycheck Protection Program is a part of the Cares Act which is passed by March 2020. This particular program funds $350 billion for those small businesses which are affected due to the COVID-19 pandemic.
Small businesses can claim this 100% guaranteed Federal loans to retain their workers and to maintain their cash flow for certain payroll expenses.
PPP also waives all the SBA fees and provides the businesses with the deferral on load repayments for a minimum of 6 months to a maximum of 1 year.
This PPP program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organizations or 501(c)(19) veterans organizations affected by coronavirus/COVID-19.
To apply for a Paycheck Protection Program loan, you can approach any lending institution that is an approved participant of the program through the existing SBA 7(a) lending program. In addition to this, you can apply for a PPP loan from any Federally insured depository institution, Federally insured credit union, and Farm Credit System institution that is participating in the program.
Small businesses and sole proprietorships can begin applying on April 3, 2020. And the Independent contractors and self-employed individuals can apply beginning April 10, 2020.
You can apply for a PPP loan from April 3, 2020, onwards until June 30, 2020- the application deadline date.
The loan you receive is fully forgiven only when the organization meets by certain parameters. According to which, the funds should have been used for Payroll Costs- includes employee salaries, hourly wages, cash tips, health insurance premiums and paid sick or medical leave Paying interest on mortgages, rent payments, leases, and utility service agreements.
In addition to those stated above, forgiveness is also based on employer maintaining or quickly rehiring employees and maintaining the salary levels. If the employer lay off employees, the forgiveness amount is proportionately reduced by the percent decrease in the number of employees laid off in comparison with the previous year’s headcount.
You should have your payroll data to back up your application information.
Only eight weeks of payroll expenses and additional amounts needed to make a payment towards debt and other obligations are covered. It’s the borrower’s prerogative to choose any eight-work period between February 15, 2020, and June 30, 2020. The maximum amount a small business can apply would be 250 percent of its average payroll expenses incurred during the 1-year period, up to a total of $10 million.
The Paycheck Protection Program provides businesses with a maximum repayment window of 10 years with a top interest rate of 4 percent. The borrower need not pay any loan fees, and the SBA has waived collateral and personal guarantee requirements.