On March 27, the federal government passed the Coronavirus Aid, Relief, and Economic Security "CARES" Act which is meant to, among many other things, support small businesses financially through this difficult time.
Small business owners should take advantage of the Paycheck Protection Program in particular. This program was granted by the federal government to encourage small businesses to retain employees and to assist with certain operational costs to keep the businesses viable during this tough economic crisis. Below are some questions and answers to help you determine if the Paycheck Protection Program is right for your small business.
Out of the over $2 trillion dollars provided for in the CARES Act, the Paycheck Protection Program involves nearly $350 billion in guaranteed loans to small businesses, a portion of which may be forgiven if used for certain business expenses.
The Paycheck Protection Program is beneficial to small businesses because the funding is meant to help each business retain workers, maintain payroll, and cover rent/mortgage and utility expenses. The loan covers expenses dating from Feb. 15, 2020 - June 30 2020, and can be forgiven and essentially turned into a non-taxable grant if certain conditions are met. Even better, there is no cost to apply.
The answer to this is most likely yes. Small businesses (including nonprofits, veteran’s organizations and Tribal businesses) with no more than 500 employees, as well as sole proprietorships, independent contractors, and self-employed individuals can all qualify.
In short, some of the benefits a small business will receive through the Paycheck Protection Program are as follows:
Yes. However, a small business cannot apply for an SBA disaster loan for the same purpose as the Paycheck Protection Program.
When applying for the loan, a small business must acknowledge that the funds received will be used for certain business-related expenses, including, but not limited to:
Any of the funds a small business utilizes for purposes not specifically permitted by the Paycheck Protection Program for forgiveness will not be forgiven.
The maximum amount a small business can receive from an SBA-approved lender is its monthly payroll cost times 2.5, but no more than $10 million. For a seasonal employer, it can receive the monthly average using a 12-week period beginning either February 15, 2019 or March 1, 2019, and ending June 30, 2019. If a small business did not exist before June 30, 2019, but would like to receive the benefit of the Paycheck Protection Program, the SBA will look at its costs in January and February 2020.
A small business can apply for the Paycheck Protection Program through any SBA-approved lender until June 30, 2020. As part of its application, it will be asked to verify the following:
In the 8 weeks following the loan signing date, all expenses related to the following can be forgiven:
The amount that can be forgiven will be reduced:
If you rehire employees that were previously laid off at the beginning of the period, or restore any decreases in wage or salary that were made at the beginning of the period, you will not be penalized for having a reduction in employees or wages, as long as you do this by June 30, 2020.