The program is called the Paycheck Protection Program. It’s being run by the U.S. Treasury and the U.S. Small Business Administration (SBA) and is the $349 billion to help small businesses in the $2.2 billion Coronavirus economic stimulus passage recently passed by Congress.
SBA Administrator Jovita Carranza said the program will give much-needed relief to small businesses and will quickly give them the cash to sustain themselves through the crisis.
“Speed is the operative word; applications for the emergency capital can begin as early as this week, with lenders using their own systems and processes to make these loans,” Carranza said. “We remain committed to supporting our nation’s more than 30 million small businesses and their employees, so that they can continue to be the fuel for our nation’s economic engine.”
Treasury Secretary Steven Mnuchin agrees and said the loan program will provide at least eight weeks of pay and money for overhead to keep workers employed.
“Treasury and the Small Business Administration expect to have this program up and running by April 3rd so that businesses can go to a participating SBA 7(a) lender, bank, or credit union, apply for a loan, and be approved on the same day,” Mnuchin said. “The loans will be forgiven as long as the funds are used to keep employees on the payroll and for certain other expenses.”
These are the loan conditions:
* Maximum loan amount up to $10 million
* The loan will be forgiven if used for payroll costs and other designated business
* Interest rate of 0.5%
* Maturity of 2 years
* The first payment deferred for six months
* 100% guarantee by SBA
* No collateral
* No personal guarantees
* No borrower or lender fees payable to SBA
Other than payroll costs like salaries, commissions and other compensation, the loans can be used for costs related to the continuation of:
* Group health care benefits, paid sick leave, paid family or medical leave
* Group insurance premiums
* Payments of interest on any mortgage obligation
* Rent or lease payments
* Interest on any debt obligation incurred before the covered period
Those eligible for the Paycheck Protection Loans include:
*Small businesses with 500 or fewer employees
* 501(c)(3) Nonprofit organizations with 500 or fewer employees
* 501(c)(19) Veteran’s organizations with 500 or fewer employees
* Tribal business concerns with 500 or fewer employees
* Independent contractors
* Self-employed individuals
Funds will be available on a first-come, first-served basis. The loans can be approved by banks and other lenders approved by the SBA and can be given out without the approval of the SBA and the Treasury.
Once granted they’ll be given to the SBA to make sure companies only get one loan.
Interest rates for the loans will be 0.5% and that rate can be taken up to two-years. The loan can cover payroll and costs such as rent, mortgages and utilities for up to eight weeks. Payment is deferred for six-months.
Here’s the loan application link
The loan is determined by 2.5x average monthly payroll amounts and are available for companies with up to 500 employees and with an annual cap of $100,000 on each employee’s salary. No collateral is needed but documentation must be provided on employee numbers, the mortgage or rent and utility costs.
Source links: Insurance Journal Small Business Administration