The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) has added a new product, titled the “Paycheck Protection Program (PPP),” to the U.S. Small Business Administration’s (SBA’s) Loan Program. The Paycheck Protection Program provides small businesses with funds to pay up to 8 weeks of payroll costs including benefits. These funds are provided in the form of loans that will be fully forgiven when used for payroll costs, interest on mortgages, rent, and utilities. The loan will be fully forgiven if at least 75% of the funds are used for payroll costs, and the remainder is used for interest on mortgages, rent, and utilities. Loan forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease. This loan has a maturity of 2 years and an interest rate of 1%. Loan payments will be deferred for the first six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.
Who is eligible?
All businesses (including farm and ranch businesses) with 500 or fewer employees are eligible are eligible for this loan program.
When to apply?
Starting April 3, 2020, small businesses and sole proprietorships can apply. Starting April 10, 2020, independent contractors and self-employed individuals can apply. You are encouraged to apply as quickly as you can because there is a funding cap on the program. The funds will be provided on a first-come, first-serve basis.
How to apply?
Financial institutions, including the Farm Credit system, will be responsible for processing loan applications and administering the loan. You can apply through any existing SBA lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. You should consult with your local lender as to whether it is participating. All loans will have the same terms regardless of lender or borrower. A list of participating lenders as well as additional information and full terms can be found at www.sba.gov.