Small Businesses Can Get Coronavirus Relief from New Federal Paycheck Protection Program
Apr 1st, 2020 @ 1:16 PM by Amber Nelson
The economic fallout from the coronavirus measures is affecting millions of small businesses across the country. In an effort to keep them afloat, a new $350 billion small business program begins Friday as part of the multi trillion-dollar CARES Act economic rescue bill enacted last week.
The Payroll Protection Program (PPP) is available for all small businesses with 500 or fewer employees and funds can be used for payroll expenses including health and leave benefits, rent and utilities payments, and even mortgage interest charges.
The PPP can provide businesses with up to $10 million or 2.5 times the total payroll expenses for the loan period. Seventy-five percent of the funds must be used towards payroll. The initial interest rate will be 0.5% but could rise with a cap of 4%. PPP loans can be forgiven for the first eight weeks if applicants keep up with their expenses and maintain their employees with constant salary levels.
More detailed eligibility requirements are being prepared by the Small Business Administration, but loans will be available to businesses that meet the SBA’s standard size definition. Veterans 501(c)(19)organizations, independent contractors, self-employed individuals and sole-proprietors also qualify. All applicants must have been in business since Feb. 15.
The first PPP loans will be available on Friday, with priority given to small businesses and non-profits. Applications from sole proprietors and independent contractors will have a delay of at least a week.
Treasury administration officials are designing a system to allow borrowers to receive PPP funds the same day that they apply. This could put the approval process entirely in the hands of lenders, with no separate SBA review.
To apply for the Paycheck Protection Program, businesses and lenders can visit the U.S. Treasury Department’s CARES Act page. Small business owners can also apply with any existing SBA 7(a) lenders, federally insured depository institutions or credit unions.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.