The U.S. Federal Government recently passed The Coronavirus Aid, Relief, and Economic Securities (CARES) Act providing $2 Trillion of relief funds to individuals, businesses and government organizations negatively affected by the COVID-19 pandemic. You may read the full text here. The Paycheck Protection Program is included in the CARES Act. This is a $349 billion forgivable loan program intended to provide American small businesses with eight weeks of cash-flow assistance through one hundred percent federally guaranteed loans.
- All small businesses, sole proprietorships, independent contractors, and self-employed individuals with less than 500 employees can apply.
- Small businesses and sole proprietorships can apply for and receive loans starting April 3, 2020. *
- Independent contractors and self-employed individuals can apply for and receive loans starting April 10, 2020.
- All applications must be submitted by June 30, 2020 (click here for application).
- **Some banks have indicated they may not be able to begin processing and approving applications on this date given lack of guidance from the Department of the Treasury. However, small businesses are still encouraged to check with their specific bank and apply early to allow processing of their application as soon as reasonably possible. **
- Loans are granted on a first come, first serve basis so businesses are encouraged to apply as early as possible due to the loan cap on the program.
- The loan has a maturity rate of two years and an interest rate of 1.00%. *
- **Businesses should note that the U.S. government doubled the interest rate for these loans on April 3, 2020 after previously announcing an interest rate of 0.5%. **
- Each business can apply for up to 2.5 times their monthly payroll costs (includes salaries up to $100,000 and some types of employee benefits). See the application for additional information on how to calculate this amount.
- Loan payments are deferred for six months; however, interest will continue to accrue over this period.
- There are no collateral or personal guarantees required to apply for and receive the loan.
- There are no prepayment penalties or fees.
- The loan covers expenses incurred February 15, 2020 through June 30, 2020.
- The loans will be forgiven if:
- the proceeds are used to cover payroll costs, and most mortgage interest, rent and utility costs over the eight-week period after the loan is made. Businesses should note the permissible uses of the loan and the method of calculating the original loan amount are different; and
- employee and compensation levels are maintained. Employee layoffs, furloughs, and/or salary reductions will reduce the amount of the loan forgiven (but will not eliminate it immediately).
The full Paycheck Protection Program Information Sheet issued by the U.S. Department of Treasury can be found here. Virtus Law, PLLC continues to monitor developments in this (and other COVID-19 areas) and will continue to post relevant updates to this website.