Apr 24, 2020 - 9:15am
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The Coronavirus Aid, Relief, and Economic Security (CARES) Act allocated $660 billion to help small businesses keep workers employed amid the pandemic and economic downturn. Known as the Paycheck Protection Program (PPP), the initiative provides 100% federally guaranteed loans to small businesses.
Importantly, these PPP loans may be forgiven if borrowers maintain their payrolls during the crisis or restore their payrolls afterward.
The administration’s PPP program guidelines can be found at www.treasury.gov, and the U.S. Small Business Administration's search tool to find a bank that offers PPP loans can be found at https://www.sba.gov/paycheckprotection/find.
The U.S. Chamber of Commerce has issued this step-by-step guide to help small businesses and self-employed individuals check eligibility and prepare to apply for a loan.
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You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating.
You are eligible to apply for a PPP loan if you are:
In addition, some special rules may make you eligible:
Borrowers will need to complete the Treasury Department's PPP Loan Application (PDF) and payroll documentation.
Lenders will also ask you for a good faith certification that:
If you are an independent contractor, sole proprietor, or self-employed individual, lenders will also be looking for certain documents (final requirements will be announced by the government) such as payroll tax filings, Forms 1099-MISC, and income and expenses from the sole proprietorship.
Loans can be up to 2.5 x the borrower’s average monthly payroll costs, not to exceed $10 million.
For businesses not operational in 2019:
2.5 x Average total monthly payroll costs incurred for January and February 2020
Maximum loan = 2.5 x Average monthly payroll for an 8-week period between February 15 or March 1, 2019 and June 30, 2019
The EIDL amount is added to the payroll calculation but may not exceed the $10 million PPP loan.
Borrowers are eligible to have their loans forgiven.
A borrower is eligible for loan forgiveness equal to the amount the borrower spent on the following items during the 8-week period (or 24-week period for loans issued after June 5th) beginning on the date of the origination of the loan:
NOTE: Not more than 40% of the forgiven amount may be for non-payroll costs.
The Association of International Certified Professional Accountants (AICPA) developed a PPP forgiveness calculator that can be found here.
The amount of loan forgiveness calculated above is reduced if there is a reduction in the number of employees or a reduction of greater than 25% in wages paid to employees. Specifically:
Reduction based on reduction of number of employees
Reduction based on reduction in salaries
Reductions in employment or wages that occur between February 15, 2020 and April 26, 2020 (as compared to February 15, 2020) shall not reduce the amount of loan forgiveness IF by December 31, 2020 the borrower eliminates the reduction in employees or reduction in wages.
Private lenders will ultimately issue PPP loans based on guidance from the SBA and Treasury Department. More information, including from lenders, should be available once the guidance is issued.
For more guidance and resources for small businesses, visit www.uschamber.com/co
Special thanks to Facebook, our partner on these guides and resources. Visit the Facebook Business Resources Hub for more resources and information.