Small businesses looking to keep workers on the payroll have a new option in the Paycheck Protection Program. Starting now, small businesses may apply for loans through the U.S. Small Business Administration (SBA) that will be forgiven loans for businesses that keep all employees on the payroll for eight weeks. Money must be used for payroll, rent, mortgage interest, or utilities.
Who Can Apply
- Small businesses with fewer than 500 employees (including sole proprietorships, independent contractors, and self-employed persons)
- 501 (c)(3) Private Non-Profit Organizations
- 501(c)(19) Veterans Organizations
- Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standardsfor those industries.
- Small businesses in the hospitality and food industry with more than one location could also be eligible if their individual locations employ fewer than 500 workers.
Where to Apply
- Businesses can apply through any existing SBA 7(a) lender or through any federally-insured depository institution, federally-insured credit union, or 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 SBA program. You should consult with your local lender as to whether it is participating in the program.
- Lenders may begin processing loan applications as soon as April 3, 2020.
- The Paycheck Protection Program will be available through June 30, 2020.
Loan Details and Forgiveness
- Loans will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent and utilities.
- It is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.
- Loan payments will be deferred for six months.
- No collateral or personal guarantees are required, and neither the government nor lenders will charge small businesses any fees.
- 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 two years and an interest rate of 1%.
If you wish to begin preparing your application, you can download a copy of the PPP borrower application form to see the information that will be requested from you when you apply with a lender.