Paycheck Protection Program
If you employ less than 500 people, you need to carefully investigate the Paycheck Protection Program (PPP). Beginning tomorrow, you can file for a low interest rate loan that is designed to be forgivable. Here are the details:
- Generally applies to employers with less than 500 employees. There are aggregation rules of affiliated companies for most industries.
- Loans can be for up to two months of your average monthly payroll costs from the last year plus an additional 25% of that amount. That amount is subject to a $10 million cap.
- Payroll costs include salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee); employee benefits including costs for vacation, parental, family, medical, or sick leave, insurance premiums, retirement benefits; and state and local taxes assessed on compensation.
- The loan amounts will be forgiven as long as the loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8 week period after the loan is made; and employee and compensation levels are maintained.
- Loan forgiveness will be reduced if you decrease your full-time employee headcount or if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019. But you will have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.
- The interest rate is 0.5%, all payments are deferred for 6 months, and the loan – if not forgiven – must be repaid within 2 years. There is no prepayment penalty. No collateral or guarantees will be required.
- You can apply through any existing SBA lender or through any federally insured depository institution, federally insured credit union, or farm credit system institution that is participating.
Here is a link to a sample application: https://www.sba.gov/sites/default/files/2020-03/Borrower%20Paycheck%20Protection%20Program%20Application_0.pdf
Stay safe and keep the course. And please let us know if we can help.