The Paycheck Protection Program (PPP)On March, 27, 2020 the U.S. Senate passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which is a stimulus bill that includes a loan program called The Paycheck Protection Program (PPP). The PPP will provide relief to small businesses whose business has been negatively affected by the outbreak of COVID-19. The PPP will help cover near-term operating expenses during the worst of the crisis, and provide incentives for employers to retain their employees with a FORGIVABLE loan up to the maximum $10 million to qualifying small businesses.
Who is eligible for PPP Loans?
Small Businesses and nonprofits with up to 500 employees (full and part-time) in a single physical location, and no more employees than the SBA standard size for the businesses’ industry. The SBA standard size by industry can be found here.
Other eligible small businesses include sole-proprietors, independent contractors, and “gig economy” workers.
Franchisees are also eligible for PPP if they are assigned a franchise identifier code by the SBA, and businesses that are in the accommodation and food services sectors.
How does the PPP work?
The PPP is a partially forgivable loan that is used to cover short-term operating expenses during the economic crisis. The loan funds must go towards payroll cost, costs related to group health care benefits, employee commissions and tips, interest on mortgage obligations, rent, utilities or interest on other debt, incurred prior to obtaining the loan. It is important to note that PPP loan funds cannot be used to pay salaries over $100,000.
The loan size will be equivalent to 250% of the employer’s average monthly payroll cost during the 1-year period before the date on which the loan is made or $10 million, whichever is less. The PPP loans have a maximum interest rate of 4%. No collateral or personal guarantee is required, and borrower and lender fees are waived.
If the PPP loan funds are used to cover payroll costs, interest payments on mortgages, rent, and utilities, then the principal amount on the PPP loan for the first 8-week period from when the loan is disbursed may be forgiven. The amount of the loan forgiven cannot exceed the principal amount of the loan. The amount of the loan forgiveness will be reduced if the average number of full-time equivalent (FTE) employees during the 8-week forgiveness period is less than the average number of FTE employees during 2/15/2019 – 6/30/2019, or 1/1/2020 – 2/29/2020.
Another attractive piece to this loan is that any principal amounts that exist after any loan forgiveness may be used to defer payments for at least six months and not more than a year.
How to Apply?
Local banks will be able to process PPP loans and any interested businesses are encouraged to contact their bank to begin the process. Any business with additional questions on this or any other COVID-19 business assistance programs can contact the Hillsborough County SBDC team or call (813) 204-9267.
Visit the Coronavirus (COVID-19) Information for Business web page for the latest information.