CARES Act Paycheck Protection Program
The Paycheck Protection Program is one the most important provisions in the new stimulus bill for small businesses. This new program sets aside $350 billion in government-backed loans from private banks that can, in some cases, be converted to grants, which means that if you meet certain requirements you won't need to pay the loan back.
Self-employed, sole proprietors, and freelance and gig economy workers are also eligible to apply. Businesses, even without a personal guarantee or collateral, can get a loan as long as they were operational on February 15, 2020.
How does the program work?
Paycheck Protection loans will come from private banks. Currently, the SBA guarantees small business loans that are given out by a network of more than 800 lenders across the U.S. The Paycheck Protection Program creates a type of emergency loan that can be forgiven when used to maintain payroll through June and expands the network beyond SBA so that more banks, credit unions and lenders can issue those loans.
What types of businesses are eligible?
The Paycheck Protection Program offers loans for small businesses with fewer than 500 employees, select types of businesses with fewer than 1,500 employees, 501(c)(3) non-profits with fewer than 500 workers and some 501(c)(19) veteran organizations. Businesses, even without a personal guarantee or collateral, can get a loan as long as they were operational on February 15, 2020.
How big of a loan can I get and what are the terms?
The maximum loan amount under the Paycheck Protection Act is $10 million, with an interest rate no higher than 4%. No personal guarantee or collateral is required for the loan. The lenders are expected to defer fees, principal and interest for no less than six months and no more than one year.
Can these loans be forgiven?
Yes, small businesses that take out these loans can get some or all of their loans forgiven. Generally speaking, as long as employers continue paying employees at normal levels during the eight weeks following the origination of the loan, then the amount they spent on payroll costs (excluding costs for any compensation above $100,000 annually), mortgage interest, rent payments and utility payments can be combined and that portion of the loan will be forgiven.
How do I get a Paycheck Protection Loan?
Banks are still getting the program up and running so check with your local bank to see if they have the program in place. Banks that are already approved SBA lenders may be quicker to get the loan program in place.
Here is a link to apply for the loan:
Note: This information has been provided by the U.S. Chamber of Commerce