For many businesses struggling with difficult business decisions, the Coronavirus Aid, Relief, and Economic Securities Act (CARES) provides much needed relief. Signed on March 27, the $2+ trillion aid and stimulus packages provides financial assistance to employers affected by the extraordinary impact of the COVID-19 pandemic.
Many employers are in the unfortunate position of having to reduce headcount to continue operations. One aspect of the CARES Act that can help employers facing uncertainty is the Paycheck Protection Program (PPP). The PPP incentivizes employers to retain their employees by providing forgivable loans to offset certain payroll costs. It amends the Small Business Act (SBA) and creates a new option for eligible employers.
Answers to Frequently Asked Questions
There is a lot for employers to consider. We present the following Q&A to serve as guidance but recommend that you consult with your accountant or business advisor to evaluate what’s best for your organization.
What employers are eligible for the PPP loan?
Employers must have less than 500 employees or meet the SBA size standard for its specific industry. For certain employers in the accommodation or food service industry (NAICS code 72), employers may be eligible if they employ 500 or more employees, provided they do not employ more than 500 employees at a single physical location.
Sole proprietors, independent contractors, gig economy workers, and self-employed individuals are also all eligible.
Where can employers apply for the PPP loan?
Employers can apply at any U.S. Small Business Administration lending institution that is approved to participate in the program. There are thousands of banks that already participate in the SBA’s lending programs, including numerous community banks. Employers do not have to visit any government institution to apply for the program. Employers can call their bank or find SBA-approved lenders in their area through SBA’s online Lender Match tool.
When is the application deadline for the PPP?
The deadline was extended to August 8, 2020 (from June 30, 2020).
What is the maximum amount an employer can borrow?
Eligible employers may borrow up to two and a half times their average monthly payroll expenses, up to a total of $10 million, and use that to cover eight weeks of payroll expenses and any additional amounts for making payments towards debt obligations.
This eight-week period may be applied to any time frame between February 15, 2020 and June 30, 2020. Seasonal business expenses will be measured using a twelve-week period beginning February 15, 2019, or March 1, 2019, whichever the seasonal employer chooses.
How can an employer ensure the loan is forgivable?
On June 3, 2020 President Trump signed into law a bill, the Paycheck Protection Program Flexibility Act (PPPFA) that gives small business owners more flexibility when applying for loan forgiveness. The changes give borrowers greater flexibility in how they spend their loan, and in the length of the time they have to spend it. Read about these changes in loan forgiveness in our article: New Law Eases Paycheck Protection Program Requirements.
Bonus: Emergency Loan Checklist and Guide for Small Businesses
The U.S. Chamber of Commerce has released a visual guide and checklist to help small businesses prepare to file for a PPP loan that we think you may find helpful. Click here to read more from the Chamber. And click the image below to open the full PDF checklist:
Getting the Help You Need
It is our intent to keep you informed during this uncertain time. There is a lot to absorb and many decisions to be made. For further guidance on what’s in your organization’s best interest, please contact your trusted business advisors.
Review, Regroup, Rebuild.