We hope you owner/operators have been gathering information on the PPP, Paycheck Protection Program which authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. Insider has been doing a deep dive into the details and application process and, this morning, we wanted to share what we have learned so far.
Insider will admit upfront, that we were skeptical of aspects of the loan program, particularly the application and approval process and the swift turnaround indicated at the signing of the bill. However, we are VERY ENCOURAGED by what we have researched.
An important note before we get into the details. This plan is solely for the purpose of keeping your staffing levels up. If you are considering laying off employees you should wait and review this plan first. Having a full staff for the application process is a positive and you will have the ability to reimburse your company for payrolls back to February 15, 2020.
Here are some details:
Who can apply?
All businesses with 500 or fewer employees can apply.
When can I apply?
Starting April 3rd, businesses can file an application.
Starting April 10th, independent contractors and self-employed individuals can apply.
Where can I apply?
Insider believes that for a quick turn around your choice could be very important. The Feds have basically invited any FDIC member bank to become a lender for this program. It does not mean that all banks will get involved, but we have been pleasantly surprised at what we have found so far. START WITH YOUR CURRENT BANK! All the loan terms are identical, no matter which institution you go through. If they are participating in the program, better to work with a bank that knows you well. If your bank is not participating, ask them for a recommendation.
Is the loan collateralized or personally guaranteed?
Remarkably, the answer is no security or personal guarantees are required.
What can I use the loans for?
You can use the loan proceeds for:
- Payroll costs, including benefits
- Interest on mortgage debt, incurred before 2/15/2020
- Rent on lease agreements, incurred before 2/15/2020
- Utilities, if service began before 2/15/2020
A note here. I have read in a couple of newsletters that the rules may limit the amount of proceeds you can use for lease payments or it can impact your forgiveness request. As of the time of publishing you should plan for only 25% of proceeds being used for non-payroll costs.
How long can I cover costs for?
Loan proceeds can be requested over an 8 week period after the loan is made. Insider has heard there is a good chance the program could be extended. Stand by for more news on this.
Is the loan forgiveness for real?
Again the answer is yes, BUT, the amount of loan forgiveness is the question.
First and foremost, you want to maintain your staff and payroll.
- Number of Staff – Loan forgiveness will be reduced by a decrease in you full-time head count.
- Level of Payroll – Forgiveness will be reduced if salaries and wages decrease more than 25% for any employee that made less than $100K in 2019.
- Re-hiring – if you reduced your payroll between February 15 and April 26, 2020, you will have until June 30th to restore your full-time employment levels.
Insider has not seen anything definitive yet on how any adjustments to forgiveness will be calculated.
How can I request loan forgiveness?
Your request should go to the lender that is servicing your loan. You will need to provide documentation. You should get that list from your lender.
Does Insider have examples of the application from and additional information?
Yes we do.
Application form is found here.
Information sheet is found here.
Insider’s Note– This is a new and rapidly developing program and we all learn from each other. If you have information to pass on that will help others as they work through the process, let us know and we will share with our readers. We are providing a comment box below to assist with that. If you have specific questions about the program, remember that your local banking representative will be your best source. The SBA also has a significant amount of information at their Payroll Protection Program website.
[wpforms id=”8663″]
Paid Advertisement
